EUROPE MARKETS: European Stocks Close Higher As Fears Of Trade Wars Abate
By Sara Sjolin, MarketWatch
Italian stocks rebound, with FTSE MIB up almost 2%
European stocks posted gains across the board on Tuesday, as concerns over the inconclusive Italian election result and fears of a global trade war ebbed.
Markets, however, trimmed advances in the afternoon after U.S. stocks dipped into negative territory (http://www.marketwatch.com/story/dow-aims-at-2nd-day-of-gains-as-trump-tariff-plan-faces-gop-push-back-2018-03-06).
What are markets doing?
The Stoxx Europe 600 index gained 0.1% to close at 371.36, building on a 1% gain from Monday (http://www.marketwatch.com/story/european-stocks-march-higher-as-fears-of-trade-wars-abate-2018-03-06).
Italy's FTSE MIB Index rallied 1.8% to 22,202.50, rebounding from a 0.4% loss on Monday that came after the country's general election produced no outright majority for any party (http://www.marketwatch.com/story/italian-election-battle-for-power-after-populist-jolt-2018-03-05), but showed a big shift toward populist, euroskeptic parties.
Read:Italy now poses an 'existential threat to the eurozone' -- analysts react to election (http://www.marketwatch.com/story/italy-election-brings-back-existential-threat-to-eurozone-analyst-react-to-sundays-vote-2018-03-05)
Germany's DAX 30 index gained 0.2% to 12,113.87 on Tuesday, while France's CAC 40 index added 0.1% to 5,170.23. The U.K.'s FTSE 100 index climbed 0.4% to 7,146.75 (http://www.marketwatch.com/story/ftse-100-climbs-as-fears-of-trade-wars-ease-smurfit-kappa-rallies-2018-03-06).
What is driving the market?
The broad-based rally came as investors put fears over a global trade war behind them for now. Those concerns were sparked last week when U.S. President Donald Trump's said he would impose tariffs on steel and aluminum imports and that "trade wars are good, and easy to win." (http://www.marketwatch.com/story/trump-on-tariffs-trade-wars-are-good-and-easy-to-win-2018-03-02)
But on Monday, Republican leaders, including House Speaker Paul Ryan, warned that the tariffs could jeopardize U.S. economic growth and began lobbying for the president to reconsider the move.
"We are extremely worried about the consequences of a trade war and are urging the White House to not advance with this plan," Ryan spokeswoman AshLee Strong said.
The European Union has threatened to slap a 25% tariff on some U.S. goods, if the tariffs come into effect, according to reports (http://www.marketwatch.com/story/eu-considers-retaliatory-tariffs-on-35-billion-us-imports-report-2018-03-02).
Sentiment in Europe was also lifted by news that North Korea is willing to discuss scrapping its nuclear program (http://www.marketwatch.com/story/north-korea-is-willing-to-hold-talks-on-giving-up-nuclear-weapons-says-seoul-2018-03-06) and will meet for a summit with the South in April.
European stocks were shrugging off concerns over Italy's political landscape. The election on Sunday showed around half of the voters supported the anti-establishment 5 Star Movement and Northern League, seen as reviving the populist threat in Europe. However, the two parties are unlikely to team up in a coalition, and analysts expect a protracted period of political horse trading for a new government to emerge.
Analysts at UBS said a government is unlikely to be appointed before April and that "volatility may increase over the short term."
Read:Italy's election resulted in political gridlock as expected -- what that means for stocks (http://www.marketwatch.com/story/italys-election-the-nightmare-best-case-and-most-likely-scenarios-for-stocks-2018-03-03)
Also read:5 things to know about Italy's Matteo Salvini, the populist eyeing the prime minister job (http://www.marketwatch.com/story/5-things-to-know-about-italys-matteo-salvini-the-populist-eyeing-the-prime-minister-job-2018-03-05)
Which stocks are in focus?
Shares of Thales SA (HO.FR) rallied 6.3% after the aerospace-and-defense company said net profit fell 13% on 2017, but that it had exceeded all of its financial objectives for the year (http://www.marketwatch.com/story/thales-sees-profit-fall-beats-financial-targets-2018-03-06).
Telecom Italia SpA (TIT.MI) gained 6% after Bloomberg reported that activist hedge fund Elliott Management is building a stake (http://www.marketwatch.com/story/elliott-builds-stake-in-telecom-italia-bloomberg-2018-03-06) in the Italian company.
Shares of Smurfit Kappa Group PLC soared 20% after the packaging company rebuffed an offer proposal from International Paper Co (http://www.marketwatch.com/story/smurfit-kappa-rebuffs-international-paper-approach-2018-03-06).(IP) .
Shares of Tesco PLC (TSCO.LN) (TSCO.LN) put on 3.4% and Wm. Morrison Supermarkets PLC (MRW.LN) added 0.1%. The moves came after a survey from Kantar Worldpanel (https://www.kantarworldpanel.com/en/pr/Tesco-and-Morrisons-rise-to-top-the-big-four-) showed the two supermarkets chains were the fastest-growing grocers in the U.K. over the last 12 weeks.
Aggreko PLC (AGK.LN) slumped 4% after the power supplier said pretax profit declined in 2017 (http://www.marketwatch.com/story/aggreko-2017-pretax-profit-falls-2018-03-06).
Just Eat PLC (JE.LN) slumped 13% after the takeaway company swung to a pretax loss in 2017 (http://www.marketwatch.com/story/just-eat-slides-to-loss-for-2017-2018-03-06). It announced extra investment to boost its delivery services.
Ashtead Group PLC (AHT.LN) lost 5.5%. The industrial equipment rental company posted an increase in third-quarter profit (http://www.marketwatch.com/story/ashtead-profit-rises-for-3q-backs-2018-view-2018-03-06), but also said finance director Suzanne Wood is to step down from her role on March 31.
What are strategists saying?
"With the U.S. president keen to put 'America first', it now appears that the talk of tariffs was a ploy to improving his position in relation to altering the North American Free Trade Agreement (NAFTA), to the advantage of the U.S. As the prospect of a trade war has cooled, traders are now feeling more confident about snapping up equities," said David Madden, market analyst at CMC Markets UK, in a note.
(END) Dow Jones Newswires
March 06, 2018 12:32 ET (17:32 GMT)Copyright (c) 2018 Dow Jones & Company, Inc.