Europe open: China trade hopes boost shares

European shares opening in positive territory on Tuesday as the feel-good factor from Sino-US trade talks encouraged investors, albeit tinged with caution.

The pan-European Stoxx 600 index was up 0.27% in early trade with all major European bourses in the green.

"With the first day of talks producing no major headlines, traders are looking to a potential post-talks soundbites to feel the pulse of both sides,” said Mike van Dulken, head of research at Accendo Markets, said.

“Chinese Vice Premier and President Xi’s top economic advisor Liu. He was among the negotiators, underscoring how seriously Beijing was taking this first round of talks."

SpreadEx analyst Connor Campbell said there was nothing “too substantial to justify such positivity, but rather a lack of mood-dampening comments has green-lit an early European rebound”.

On the economics front, German industrial production slipped 1.9% month-to-month in November, well below the consensus for a 0.3% increase.

The year-over-year rate slipped to -4.7% from a downwardly-revised +0.5% in October. Net revisions to the month-to-month data were -0.3 percentage points.

“This headline is much worse than we expected. Production was hit by weakness across the board, but the 4.1% month-to-month drop in output of consumer goods did the main damage,” said analysts at Pantheon Macroeconomics.

“Production of capital and intermediate goods fell by 1.8% and 1.0%, respectively, and the weakness persisted outside core manufacturing too. Output in the energy and construction sectors slipped by 3.1% and 1.7%, respectively.”

“We think production rebounded in December, but these data have crushed all hope of a Q4 rebound in manufacturing following the weak Q3, which was driven mainly by falling exports and output of cars ahead of the new EU emissions regulation.”

“We now think production fell 1.4% quarter-on-quarter in Q4, only slightly worse than the 1.7% plunge in Q3. In other words, the German manufacturing sector was in recession in the second half of 2018, reflecting in part the fact that the industry hit capacity constraints earlier in the year and rising global uncertainty amid the trade conflict between the U.S. and China.”

In corporate news, Morrisons was in the red even as it reported stronger-than-expected retail sales over the festive period. Investors were pleased with the company’s like-for-like sales growth but disappointed by another relatively weak performance form the core retail arm.

Richard Hunter, head of markets at Interactive Investor, said: "The shares have fallen foul of the wider and weaker market environment, having dipped 14% over the last six months, although over the last year the 2.5% decline in the price compares favourably with the FTSE100, which has dropped 11.5% in the corresponding period.

Signify was the largest faller on the STOXX 600 after a downgrade to neutral from Bank of America Merrill Lynch. Rotork topped the gainers after the same same broker upgraded the stock.