3 weeks ago
Stock Market

MarketPulse Europe: Trade, Brexit Hopes Give Rally New Legs

By Geoffrey Smith Investing.com -- Stock markets in Europe are pushing higher Monday as the two biggest risks to the region’s

By Geoffrey Smith

Investing.com -- Stock markets in Europe are pushing higher Monday as the two biggest risks to the region’s economy abate.

At 04:00 AM ET (0900 GMT), the benchmark Euro Stoxx 600 was up 1.50 points, or 0.4% at 375.74. Trading is quiet in many continental exchanges as the week-long Carnival festivities approach their climax, but France’s CAC 40 is leading the way, up 0.6%, while Germany’s Dax and the U.K.’s FTSE 100 are both up 0.3%

The threat of an escalating trade war between the U.S. and China appears to be lifting, after the Wall Street Journal reported overnight that the two sides are closing in on a deal that would reduce most tariffs for U.S. goods entering China, guarantee higher volumes of U.S. exports to China – notably in agricultural and chemical products. European chemicals is the only sector in the red this morning in, partly on fears that the U.S. deal will make life more difficult for it.

The deal will reportedly also make at least some progress on safeguarding intellectual property rights.

In addition, the risk of a ‘Hard Brexit’ also seems much less than a couple of weeks ago. While the political direction is uncertain, Brexiteers appear to be softening their opposition to the withdrawal agreement negotiated by Prime Minister Theresa May. And in the last two weeks, regulators on both sides of the channel have signed off on plans to let cross-border finance operate pretty much as it does now, at least for a transitional period.

That not only has direct consequences for keeping financial markets functioning smoothly, it also encourages hopes that other sectors such as air transport and trade in food and medicines will also find a way to avoid worst-case scenarios. The best-performing stock in the Stoxx 600 this morning is Ryanair (LON:RYA), which is more sensitive than most stocks on a smooth Brexit.