Europe close: Stocks eye possible break in Brexit, US-China storm clouds

updated: 15 March 2019 at 6:27pm Author: Alexander Bueso

(Sharecast News) - Stocks on the Continent pushed higher with investors apparently eyeing a possible break in the storm clouds around Brexit and US-China trade talks.
There were also some positive comments to be heard on the outlook from some - albeit not all - of the top equity strategists in the market.

At the end of trading, the benchmark Stoxx 600 was up by 0.68% at 381.10, alongside an advance of 0.85% to 11,685.69 for the German Dax and a gain of 0.80% to 21,045.41 on the FTSE Mibtel 30.

Overnight, China's state-owned news agency, Xinhua, reported that Chinese Vice Premier Liu, US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer made "further substantive progress" on trade talks in a telephone conversation held on Thursday.

Meanwhile, Credit Suisse's equity strategy team on Friday upped their recommendation for shares of European cyclicals relative to defensives from 'benchmark' to 'overweight'.

The investment bank argued that European Purchasing Managers' Indices and 'growth pessimism' had hit a bottom even as China appeared to be stabilising.

As well, global PMIs had reached levels at which they had also troughed in the past, Credit Suisse said.

Strategists at Deutsche Bank on the other hand stuck to their 'neutral' view for European stocks, but only because of a likely US-China trade truce and the shift towards a Brexit deal which, they said, would allow the current 'overshoot' in valuations versus their estimate of fair value to be sustained.

Indeed, with European shares having outperformed their US peers by 6% since the lows plumbed in December 2018, they also stood by their 'underweight' recommendation relative to US stocks.

Regarding Brexit, on Thursday evening Parliament voted by a landslide to vote for an extension to Article 50 and, implicitly, for another vote on Prime Minister Theresa May's withdrawal bill, likely on 19 March.

Nevertheless, it remained to be seen whether the 27 remaining EU capital would grant Britain that breathing space and what conditions they might attach.

Economic news was otherwise quite light at the end of the week, although Eurostat did confirm an earlier estimate for the single currency bloc's harmonised CPI covering the month of February, which it said had printed at up by 0.3% on the month and by 1.5% on the year.

To take note of, in the background, and accoridng to Fed funds futures, the probability of a 25 basis point interest rate hike by the US Federal Reserve by end-2019 was now less than 70%.