European shares saw broad-based gains yesterday, rallying after encouraging comments from China on trade with the US came as a welcome relief amid growth worries and political turmoil.
The optimism seemed to outweigh concerns about impeachment surrounding US president Donald Trump which pushed Wall Street into the red. London’s blue-chip index jumped 0.8% percent despite heavy falls in some stocks.
The pan-European Stoxx-600 index closed up 0.6%, after weak purchasing managers’ surveys, worries about the UK’s exit from the European Union and the impeachment probe into Trump had pressured the index over the last three sessions.
“What we see is just market expectations, it is purely micro-management of the market,” said Stephane Barbier de la Serre, macro strategist at Makor Capital Markets.
“They sold [on Wednesday] and they are buying back. It is very much algorithm trading,” he said.
Trade optimism was spurred by Beijing saying it is in close communication with Washington and preparing to make progress at trade talks in October.
This came after Mr Trump’s overnight comment that a China-US trade deal could happen sooner than expected.
Although investors are keeping a close watch on US-China trade moves, they are starting to price in the possibility of trade negotiations continuing for a long time, and are nearing the point of growing immune to developments on this front, analysts say.
“If none of the external shocks hitting global manufacturing and trade get much worse than it is already, households and companies are likely to get used to the noise and risks over time,” wrote the chief economist at Berenberg Holger Schmieding.
“When the odds of impeachment go down, the market goes up. When the odds of impeachment goes up, it goes down,” said Phil Flynn, an analyst with Price Futures Group in Chicago.
“The market doesn’t like the prospect of impeachment that’s going to be a negative for the US economy. It’s going to be a negative on US-China trade.”
Meanwhile, oil prices fell as new developments in the inquiry surrounding Mr Trump weighed on demand sentiment while moves to quickly restore Saudi output after attacks on its oil installations promised more oil supply.
Both benchmarks fell for a third straight day, with Brent crude down 39 cents, or 0.6%, at $62 a barrel and US West Texas Intermediate crude 65c, or 1.2%, lower at $55.84 a barrel.
Prices have been weighed down by the faster-than-expected recovery of Saudi output after the drone and missile strikes on two of its oil-processing plants, as well as a surprise 2.4-million- barrel build in US crude inventories last week.
Saudi Arabia, the world’s top oil exporter, has restored its production capacity to 11.3 million barrels per day, sources briefed on state oil company Saudi Aramco’s operations said.
Aramco, meanwhile, said that it has approached Abu Dhabi Investment Authority, Singapore’s GIC and other sovereign wealth funds to invest in the domestic leg of the oil company’s listing at it seeks to achieve a $2tn valuation.