By Carla Mozee, MarketWatch
European stocks finished in the green Tuesday, with German stocks climbing after German Chancellor Angela Merkel steered her coalition government away from immediate collapse by reaching an agreement over migration.
How markets are moving
Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX +0.81% rallied by 0.9% to 12,349.14. It lost 0.6% in the previous session and had tilted toward entering correction territory, defined as a 10% pullback, or greater, from a recent top.
France’s CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 +0.63% gained 0.3% to 5,292.35. The U.K.’s FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +0.37% was up 0.1% to 7,554.37, while Spain’s IBEX 35 /zigman2/quotes/210597995/delayed XX:IBEX +0.81% surged 1.1% to end at 9,660.90, notching its best one-day return since June 11.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD -0.0086% traded at $1.1645, little changed from $1.1641 late Monday in New York.
What’s driving the market
German blue-chips outperformed most other European benchmarks, finding relief after German Chancellor Merkel and her Interior Minister Horst Seehofer reached a last-minute agreement late Monday for tighter control over immigration. Merkel said the deal is a “really good compromise” that should help regulate movement of asylum seekers within the European Union without creating tensions with Germany’s neighbors.
Merkel’s disagreement with her coalition partner threatened to lead to the collapse of her government, which is a partnership between her Christian Democrats (CDU), Seehofer’s Christian Social Union (CSU) and the Social Democrats (SPD). There may still be a risk, as the SPD is expected to meet Tuesday to discuss whether it approves of the migration agreement.
Markets overall appeared for now to set aside turmoil surrounding the U.S. and its dissatisfaction over global trade relationships. The European Union has threatened $300 billion in fresh tariffs against U.S. products if U.S. President Donald Trump follows through on levies targeting the trade bloc’s auto makers.
The Trump administration is expected to formally impose tariffs on a round of Chinese goods on Friday, and Beijing is expected to retaliate.
What strategists are saying
“The euro rebounded on the [German-migration deal] news to recover some of the previously lost ground, as concerns over a government collapse in eurozone’s largest economy have eased for the time being,” said Charalambos Pissouros, senior market analyst at JFD Brokers, in a note.
“That said, we will continue closely monitoring developments in the nation’s political landscape, as any fresh clashes between Merkel and her partners could revive fears over a coalition breakup and thereby bring the euro under renewed selling interest,” he said.
Glencore PLC /zigman2/quotes/201400686/delayed UK:GLEN +1.49% /zigman2/quotes/209462106/delayed GLCNF +1.90% tumbled 8.1%, after the commodities trader and miner said its Glencore Ltd. subsidiary received a subpoena from the Justice Department related to potential money laundering. The U.S. government has requested documents tied to Glencore’s business in Nigeria, the Democratic Republic of Congo and Venezuela from 2007 to present.
Commerzbank AG shares /zigman2/quotes/200193353/delayed DE:CBK +0.57% gained 0.6% after the German lender said it will sell its equity markets and commodities, or EMC, business to French lender Societe Generale SA /zigman2/quotes/206663756/delayed FR:GLE +1.77% . Financial details weren’t disclosed. SocGen shares were up 0.6%.
A reading on retail sales in the eurozone in May showed that rising energy costs are limiting spending on other goods and services, threatening to weaken economic growth.
The U.K. purchasing managers’ index for construction in June came in at 53.1, reaching a seven-month high. Expectations were for a level of 52.5, according to FactSet. Readings of at least 50 signify improving conditions.
Meanwhile, Sweden’s central bank reiterated its intention to start raising its key policy rate in the fourth quarter, but signaled that it is in no rush to end negative repo rates, which it kept at a record low of minus 0.5%.