Europe close: Positive news on trade and out of China buoy shares

12 September 2018

(Sharecast News) - Stocks on the Continent finished the session with moderate gains buoyed by news that Washington had extended an olive branch to China in their ongoing trade spat.
Among other things, that helped to offset the drag from political squabbling in Italy over the 2019 budget.

According to the <em>Journal</em>, the US is giving China another opportunity to address outstanding issues between the two countries before it implements new levies on goods made in the Asian giant.

Nevertheless, <em>IG</em>'s Josh Mahony cautioned: "Yesterday's move by the Chinese to push the WTO into enacting tariffs on the US are likely to be too slow given the processes involved and thus there is no doubt that the Chinese are seeking some form of retaliation in an ever-intensifying trade war. Should further discussions go ahead, there is likely to be a growing feeling that if the two sides do not progress in a positive manner, then this trade war could play out for a long time yet."

Against that backdrop, by the end of trading the FTSE Mibtel was ahead by 0.52% or 109.16 points to 20,963.00, after having traded sharply lower at on point during the session following an abrupt intra-day spike in longer-term Italian bond yields.

In parallel, the benchmark Stoxx 600 was ahead by 0.47% or 1.77 points at 377.08, alongside an advance of 0.52% or 62.03 points to 12,032.30 for the German Dax and a gain of 0.91% or 48.34 points to 5,332.13 on the Cac-40.

On Tuesday, Italian deputy prime minister, Luigi di Maio, warned the government would run into trouble if his political party's, the 5-Star Movement, proposal for a 'citizenship wage' was not included in the 2019 budget law, <em>ANSA</em> reported.

However, come Wednesday, reports citing the prime minister denied that the 5 Star was calling for the finance minister, Giovanni Tria's head if it did not get its way.

From a sector stand-point, better than expected figures on lending in China referencing the month of August helped to buoy firms in the Basic Resources space, with the corresponding Stoxx 600 sector gauge climbing by 5.53 points or 1.34% to 419.69.

Oil&amp;Gas shares also provided a boost to the main indices, with that Stoxx 600 sector sub-index climbing by 1.60% or 5.46 points to 346.52 as traders reacted to lower-than-expected weekly US inventory figures.

In the background, and amid ongoing allegations of fraud against top League officials, ex-President Sergio Mattarella was giving a speech emphasising that no one was above the law.

Meanwhile, in economic news, and according to <em>Eurostat</em>, Eurozone industrial production was reported at down by 0.8% month-on-month in July (consensus: -0.3%), despite a 0.8% jump in the output of capital goods.