Europe open: Stocks rally after China, US agree 'phase one' trade deal
European stocks gained ground in early trade on Monday after China and the US reached a ‘phase one’ trade agreement.
At 0845 GMT, the benchmark Stoxx Europe 600 index was up 0.8% at 415.21, while Germany’s DAX was 0.6% firmer at 13,355.66 and France’s CAC 40 was 0.7% higher at 5,961.19.
Speaking to CBS’s Face the Nation, US Trade Representative Robert Lighthizer said on Sunday that a deal between the two nations was "totally done" and will nearly double US exports to China over the next two years.
Stronger-than-anticipated Chinese data also helped to boost the mood. Retail sales rose 8% year-on-year in November versus a 7.2% increase the month before and expectations of 7.6% growth. Industrial output increased 6.2% on the year compared to 5% growth in October and expectations of a 4.7% jump.
CMC Markets analyst Michael Hewson said: "With two major tail risks in the rear view mirror, with a US, China phase one trade deal apparently completed, and UK politics in a more stable place than it has been in three years, investors are taking their cues from much better than expected Chinese retail sales and industrial production data for November, and embarking on a bit of pre-Christmas shopping."
Spreadex analyst Connor Campbell struck a more cautious note, however. "First and foremost, the deal hasn’t actually finished being translated. Which means, despite US trade representative Robert Lighthizer insisting that it is ‘totally done’, there will be some routine ‘scrubs’ to the text - not the most reassuring state of affairs given how quick to anger both sides are.
"The US agreed to one of China’s key red lines, i.e. rolling back pre-existing tariffs. However, that reversal has been described as ‘minimal’ - 25% tariffs will be maintained on around $250 billion in goods, while only $120 billion will see the charges reduced to 7.5%.
"As for Trump’s key demands, China will now reportedly purchase an extra $16 billion in agricultural goods per year, on top of the $24 billion already pencilled in, taking the total in 2020 and 2021 to at least $40 billion. The President himself said he thinks ‘they’ll hit $50 billion’, and that they’ve ‘already stepped it up’. However these figures have been greeted with scepticism, if just because of how steep that increase would need to be on historical purchases."
In corporate news, H&M shares rose even as the Swedish fashion retailer’s fourth-quarter sales missed analysts’ expectations.
On the downside, Electrolux tumbled after the Swedish home appliance manufacturer said its North American business would incur costs of around $70m in the fourth quarter, up from a previous estimate of $25m.