Europe close: Stocks get off to strong start in 2020, banks and tech pace gains

Stocks on the Continent continued pushing higher in the new year, with banking and technology names in the lead following news of central bank easing in China and that the US would sign its phase-one trade deal with Beijing on 15 January.

"Equity traders are in risk-on mode today as the US-China trade story is still fuelling the upbeat sentiment. Phase one of the trade deal will be singed in the middle of this month, and the feel-good factor is still circulating," said David Madden, senior market analyst at CMC Markets UK.

Overnight, the PBoC said it would cut the reserve requirement ratio for the country's lenders by 50 basis points, close on the heels of US President Donald's Trump's announcement, two days before, that the phase-one trade deal with Beijing would be signed on 15 January.

Trump also said that he would travel to China to kick-off talks on a second round trade deal.

By the end of trading, the German Dax was up 1.03% to 13,385.93, alongside a gain of 1.40% to 23,836.26 for the FTSE Mibtel, while the Cac-40 rose 1.06% to 6,041.50 and the Spanish Ibex 35 was 1.49% stronger at 9,691.2.

But plenty of analysts were also displaying caution, with those at Rabobank telling clients: "2019 was the best year for global stocks since the financial crisis a decade ago. Investors who held their nerves during periods of high trade tensions between the US and China were handsomely rewarded.

"[...] That said, it will be very difficult if not impossible to repeat such impressive gains in 2020 if our non-consensus view on the US falling into a recession proves to be correct and if a trade truce does not last as we anticipate."

Euro/dollar meanwhile was 0.45% lower to 1.11715 alongside, while the yield on the benchmark 10-year bund was off by four basis points at -0.22% after earlier rising as high as -0.16%.

The Stoxx 600 bank sector index paced gains, adding 1.93% to 146.05, while that for Technology ran up 1.88% to 540.07.

Pacing the advance at the individual company level were shares of Commerzbank, Deutsche Bank, AIB Group, Airbus and IAG.

Lifting shares in Airbus was news that the jetmaker delivered 863 aircraft in 2019, putting it well ahead of rival Boeing, which had delivered 345 between January and November due to the grounding of its 737 Max model.

And boosting IAG was an upgrade out of Citi from 'hold' to 'buy'.

Going the other way, shares of Tullow Oil were at the bottom of the pile after the outfit announced that its Carapa-1 exploration well offshore Guyana had delivered a net pay that was lower than pre-drill forecasts.

Shares of Atlantia and John Wood Group meanwhile added to the losses sustained at the end of 2019.

In economic news, the spotlight was on Madrid, following reports that a minority left-wing coalition government could well be voted in on 7 February, helping to reduce uncertainty - at least in the very near-term.

Against that backdrop, IHS Markit's euro area factory sector Purchasing Managers' Index for December was revised up from a 45.9 to 46.3, although the average fourth quarter reading of 46.4 was a seven-year low, unchanged from the prior quarter.

On a similar note, and also coming out of China overnight, survey compiler Caixin's China manufacturing sector PMI slipped from a reading of 51.8 for November to 51.5 in December (consensus: 51.6).

Miguel Chanco at Pantheon Macroeconomics said the dip in the China PMI was not really surprising coming as it did after a strong run, although a drop in a sub-index for new orders contained in the same report was 'disappointing'.

CAC 40 - Risers

ST Microelectronics (STM) 24.79 +3.42%

Airbus SE (AIR) 133.52 +2.33%

Kering (KER) 598.00 +2.19%

Peugeot (UG) 21.74 +2.07%

Societe Generale S.A. (GLE) 31.66 +2.06%

ENGIE (ENGI) 14.69 +2.05%

Credit Agricole (ACA) 13.19 +2.01%

Capgemini (CAP) 111.05 +1.97%

Bouygues (EN) 38.61 +1.93%

Schneider Electric (SU) 93.06 +1.70%

CAC 40 - Fallers

Renault (RNO) 41.90 -0.66%

Michelin (ML) 108.45 -0.60%

Sodexo (SW) 105.60 -0.05%

Safran (SAF) 137.60 -0.04%