Europe close: Stocks finish first week of 2019 higher

Stocks on the Continent managed to finish a volatile first week of trading in 2019 higher, following news that top trade officials from the US and China were set to start formal talks on Monday, Beijing unveiled new stimulus measures, a key report on US jobs came in more than twice as strong as expected - when including revisions - and US central bankers dialed-back on rate hike expectations.

Regarding the former, David Madden at CMC Markets UK said: "The US and China have agreed to hold trade talks on the 7 and 8 of January. The landscape has changed recently, and given the sell-off in US stocks, and the continued weakness in Chinese equities in the past couple of months, both sides may take a softer approach to the talks."

Meanwhile, in the States, according to the Department of Labor, the US economy generated 312,000 new jobs in December (consensus: 184,000), while data for the prior two months were revised higher by a combined 58,000.

To take note of as well, for the first time since June 2016, after the Brexit vote, strategists at Bank of America-Merrill Lynch said their so-called 'Bull&Bear' indicator was now flashing a 'buy' signal on the back of extreme readings on investor pessimism. In January 2018, it had signaled that it was time to 'sell'.

Nevertheless, during the session investors were also asked to digest a spate of weak data out in the euro area and the ongoing partial shutdown of the US federal government continued to grind on and was about to enter its third week, which analysts said might entail very large job losses should it be sustained for much longer.

"This one could even extend into months rather than weeks. Up to now, the economic cost has been limited. But the disruption will increase exponentially for every week the shutdown isn’t resolved, particularly if it delays the payment of tax refunds next month," said Paul Ashworth at Capital Economics.

By the end of trading, the benchmark Stoxx 600 was ahead by 2.83% or 9.46 points to 343.38, alongside an advance of 3.37% or 351.03 points to 10,767.69 for the German Dax and a rise of 3.37% or 613.39 points to 18,831.79 on the FTSE Mibtel.

Following the Chinese central bank's announcement overnight that it would cut the reserve requirement ratio for the country's lenders by 100 basis points starting from 15 January, it was shares of Basic Resources which were pacing gains in markets, with the corresponding Stoxx 600 sector gauge adding 5.38% to 399.63.

Oil&Gas shares were also on the up, with the corresponding sector sub-index adding 2.94% to 312.69 as Brent crude oil added 2.42% to 57.34 on the back of those fresh policy moves in China.

In parallel, officials in Beijing unveiled tax cuts and increased financing for businesses.

Meanwhile, in the Eurozone, IHS Markit marked down its services sector Purchasing Managers' Index for December from a preliminary reading of 51.4 to 51.2.

To take note of, according to Claus Vistesen at Pantheon Macroeconomics, the French PMI data contained in that survey was consistent with activity in the Eurozone's second largest economy screeching to a halt at the end of 2018 in the wake of the 'yellow vest' protests in Paris.

The latest euro area consumer price data also made for an interesting read, with Eurostat reporting a drop in the year-on-year rate of increase in CPI from 1.9% for November to 1.6% in December (consensus: 1.8%).

Nonetheless, at the 'core' level, the rate of advance in CPI was unchanged at 1.0%, as expected.