Europe markets gain as trade war worries take a back seat

Traders at the Frankfurt Stock Exchange. The DAX 30 gained 0.5% to 12,609.85 points yesterday.


Stock markets across the world rose yesterday with investors feeling optimistic about the upcoming corporate results season, especially in the US, dealers said. The British pound stemmed its decline against the dollar and euro after key resignations from the UK government over Brexit hammered the currency. Trade war worries also took a back seat as bullish sentiment prevailed. “With the prospect of a positive earnings’ season ahead of us, investors seem to have forgotten the threat of further trade tensions,” said Konstantinos Anthis, head of research at ADSS.

According to the FactSet data provider, S&P 500 company earnings are expected to grow 20% in the second quarter. But when adding in “the potential for positive surprises”, growth could well exceed 23%, said Hussein Sayed, chief market strategist at FXTM. The British pound remained under pressure, but managed small gains, one day after Brexit divisions sparked the shock resignations of two senior ministers including foreign secretary Boris Johnson.

Both Johnson and Brexit minister David Davis quit Monday in a heavy blow to Prime Minister Theresa May’s authority – and her plan for leaving the European Union. The news sparked speculation of a potential leadership challenge and the threat of another general election. “Theresa May defiantly stood her ground on Monday,” said Jasper Lawler, analyst at London Capital Group. “With threats of a vote of no confidence unfounded, she lives to fight another day as prime minister… (and) the pound managed to pick itself up.”

But the market remains nervous of any signs of a leadership challenge to May, said XTB analyst David Cheetham. “Should one occur, and be successful, then there is the potential for further declines in sterling,” he said. Back in stock markets, Europe followed most of Asia higher after another strong lead from New York on Monday. Wall Street moved ahead yesterday, adding momentum to key European markets which all closed in the green, although London was held back by the recovering pound. The FTSE 100 was up 0.1% at 7,692.04 points, Frankfurt’s DAX 30 gained 0.5% to 12,609.85 and Paris’s CAC 40 rose 0.7% to 5,434.36 points at the close yesterday.

Oil prices rose, partly on expectations of US sanctions on key producer Iran and ongoing political and economic turmoil in Venezuela. Traders were also watching Norwegian oil production after strike action on a Shell North Sea oilfield prompted the first outages.

Sources and photo-credits: AFP, Gulf Times