European stocks stall as auto tariff worries weigh
A bidding war for stock exchange operator Euronext and gains in defensive stocks propped up European markets on Monday, although doubts on whether or not the United States will impose tariffs on EU carmakers weighed on shares.
Europe's benchmark STOXX index was up just 0.1%, as the spillover from upbeat trading in Asian hours wore off. Trade-sensitive shares in Germany and France were down 0.1% and 0.2%, respectively. The auto industry sub-index fell 0.8%. "For European markets, the fact that Trump still hasn't made a decision in relation to tariffs is kind of hanging over," said David Madden, market analyst at CMC Markets in London.
"People don't want to buy up the DAX or the CAC aggressively while that decision hasn't been made yet."
Reports last week that U.S. President Donald Trump will delay a decision on the EU auto tariffs for another 180 days, along with better-than-expected corporate results and optimism about U.S. trade talks with China had sent European shares back near a 4-year peak.
European shares started on a positive note on Monday after Chinese state media Xinhua reported over the weekend that Beijing and Washington had "constructive talks" on trade in a high-level phone call.
China's central bank also unexpectedly trimmed a closely watched lending rate for the first time in more than four years on Monday, a signal that policymakers are ready to act to prop up slowing growth.
The top gainer on the STOXX 600 was Spanish bourse BME , which soared 36.6% to a four-year high after pan
European stock market operator Euronext and Switzerland's SIX entered a bidding war for the operator.
Europe's financial services index jumped 0.8%, but defensive real estate and healthcare sectors - considered as safer bets at times of economic uncertainty - led gains among the major European subsectors. Among other individual movers, Frankfurt-listed shares of genetic testing company Qiagen NV jumped 12.1% after the company said it had started reviewing options including a sale.
London's internationally exposed FTSE 100 was hurt by a stronger pound after polls showed British Prime Minister Boris Johnson's Conservatives had a 14 point lead over the opposition Labour Party ahead of a Dec. 12 election.
The domestically focused mid-cap index, which tends to rise with sterling, gained 0.4%.
British life and general insurer Aviva Plc was the top decliner on the STOXX 600 after the firm said it was looking at strategic options for its operations in Vietnam, Indonesia and Hong Kong.
The euro enjoyed a small respite on Monday, jumping to an 11-day high versus the U.S. dollar, on expectations that Washington and Beijing can soon sign off on a deal to end a trade war that has been a drag on global economic growth.
Faint optimism for a breakthrough was supported by a report from Chinese state news wire Xinhua, which said the two sides had "constructive talks" over the weekend.
The export-oriented European economy has suffered from the 16 month long trade dispute between the world's two largest economies. The tariff war has taken a toll on the world's manufacturing.
Investors injected $3 billion of inflows into European equities over the past two weeks, ending a record run of 85 weeks of persistent outflows, EPFR data showed last week.
"Market participants remain optimistic that a partial U.S.-China trade deal will be signed soon and have welcomed tentative signs of economic improvement outside of the U.S., especially in the euro zone, both of which are eroding the relative appeal of the U.S. dollar," said Lee Hardman, currency analyst at MUFG.
The euro was last up 0.1% at $1.1068, its highest since Nov. 7, and the index which tracks the greenback against six major currencies was down 0.1% at 97.90.
The offshore Chinese yuan, however, remained below 7 per dollar, last falling 0.1% to 7.0142. The yuan is the most sensitive currency to the trade dispute.
"USD/CNY above 7.0 suggests that the market is not yet convinced a solution is near," said Marshall Gittler Chief Strategist at FX analysis firm ACLS Global.
The liveliest mover, however, was the pound, creeping up 0.3% against the dollar to $1.2945 and against the euro to 85.41 pence. It has surged to a 17-day high versus the dollar and a six-month high versus the common currency.
Sterling was boosted by expectations that the Conservative Party could win a majority in the Dec. 12 election, as well as by British Prime Minister Boris Johnson saying that all Tory candidates in the election have pledged to back his Brexit deal. This could open the door to getting the Brexit deal agreement passed through parliament.