By Dave Morris
European investors halted two days of decline with an outburst of bullishness as U.S.-China trade tensions gave mixed signals.
How did markets perform?
The Stoxx 600 /zigman2/quotes/210599654/delayed XX:SXXP +1.00% climbed to 378.6, a gain of 0.7% after Thursday’s fall of 1.7%.
Germany’s DAX /zigman2/quotes/210597999/delayed DX:DAX +1.43% /zigman2/quotes/210223310/composite DAX +1.43% index was the standout regional performer, jumping 1% higher to 12,102.2. It had swooned 1.7% in the previous session Thursday.
The U.K.’s FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +1.12% was up 0.3% to 7,231, following a decline of 0.9% Thursday.
The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.0366% edged up 0.1% to $1.3009 building on Thursday’s rise of 0.2%.
France’s CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 +1.50% rose 0.7% to 5,352.4. On Thursday it sank 1.9%.
Italy’s FTSE MIB /zigman2/quotes/210598024/delayed IT:I945 +1.22% moved up 0.9% to 21,005.2, after falling 1.8% Thursday.
What’s moving the markets?
Despite clearly negative developments in the U.S.-China trade story lording over the headlines, European stocks were significantly higher Friday morning and it was difficult to find a simple explanation.
Economic data from Germany seemed to be one signal investors seized on. Exports for March smashed expectations, coming in at 1.5% month over month versus an expected drop of 0.2%. The figure seemed to allay concerns about weakness in German manufacturing, particularly in products they export to the Chinese market. In the U.K., first quarter gross domestic product (GDP) grew 0.5% over the previous quarter, slightly above the consensus of 0.45%. The Office of National Statistics attributed the increase to manufacturers stockpiling ahead of the U.K.’s expected exit from the European Union.
The major developments in the trade deal standoff between the U.S. and China began with reports that there had been no breakthrough in the talks in Washington, D.C., meaning that U.S. President Donald Trump’s threat to raise tariffs became policy. The silver lining for investors was that Trump said negotiations were not yet dead, and described the “beautiful letter” he received from Chinese leader Xi Jinping urging the two countries to work together to find a solution.
Which stocks are active?
Financials were broadly responsible for lifting the Stoxx Europe 600, in terms of their market cap-based weighting. Insurer Prudential PLC /zigman2/quotes/200530572/delayed UK:PRU +2.94% rose 1.7%, and both Lloyds Banking Group /zigman2/quotes/202285510/delayed UK:LLOY -1.55% and France’s BNP Paribas SA /zigman2/quotes/206351084/delayed FR:BNP +0.41% climbed 1.2%.
Shares of Thyssenkrupp AG /zigman2/quotes/207409543/delayed DE:TKA -1.56% shot up 18% after the German conglomerate ditched plans to split itself into two separate companies, saying it will spin off and list its elevator unit.
British Airways parent International Consolidated Airlines Group SA /zigman2/quotes/208070069/delayed UK:IAG +3.08% reported first quarter earnings in line with management’s predictions and said expected to make more revenue per passenger in 2019, driving shares up 3%.
Neil Wilson, chief market analyst for Markets.com, said the IAG story was similar to other airlines facing challenges: “Lots of competition means no one has the pricing power, whilst labor costs are a factor, but the biggest headwind right now is fuel costs, which were up 15.8%. Nonfuel costs were 0.8% higher.”
Rolls-Royce Holdings PLC /zigman2/quotes/203646520/delayed UK:RR +3.35% whose shares were hit when its Trent 1000 engine came under scrutiny over deterioration of its blades, got a boost from IAG’s results. IAG CEO William Walsh said on the earnings call that he was “a bit more confident” that Rolls-Royce was getting the problem under control. Rolls-Royce shares increased 1.1%.