Europe: Shares end higher as China move offsets G20 disappointment

[LONDON] European shares fell on Monday but were off earlier lows as a decision by China to resume its easing cycle partly offset disappointment over the G20 meeting failing to agree new measures to boost growth.

The pan-European FTSEurofirst 300 index ended up 0.7 per cent at 1,313.74 points, its highest level since Feb 2. The index however registered its third straight month of losses due to investor concerns over the global growth outlook.

Fresh euro zone data showed inflation unexpectedly turned negative in February, helping the market come off lows and adding weight to expectations the ECB will further boost stimulus measures at its meeting next month.

Sentiment however was fragile due to worries over growth. "Ongoing investor worries about deflation and other economic risks mean the potential gains for the markets may be limited unless we see a marked improvement in global data," Gain Capital analyst Fawad Razaqzada said.

On Monday, China's central bank cut the reserve requirement ratio, or the amount of cash that banks must hold as reserves, by 50 basis points, to help revive a slowing economy.

The Group of 20 finance ministers and central bankers said they needed to look beyond ultra-low interest rates to revive the global economy, flagging risks to growth including volatile capital flows, and sinking commodity prices. "The G20 conclusions confirm that policymakers still have not felt enough the pressure from markets," said Didier Saint-Georges, Managing Director at Carmignac.

Miners were the top sectoral gainer, up 3.4 per cent, as metal prices turned higher after the rate move by China, a top global metal consumer.

Autos rose 1.7 per cent, helped by a rise of more than 4 per cent in Fiat Chrysler on speculation about a potential tie-up with Peugeot.

British supermarket group Morrisons surged 5.9 per cent, outperforming its sector, after striking a distribution deal with online retailer Amazon. "The tie-up with Amazon is also consistent with Morrisons'plans to drive volume, broaden its brand reach and leverage its marginal costs," Shore Capital said in a note. "Operational improvement should lead to free cash generation that shareholders can expect in time to receive." Elsewhere in the sector, Tesco fell 2 per cent, Carrefour inched 0.6 per cent higher and Ahold was up 0.5 per cent.

Germany's DAX fell 0.2 per cent, dragged down by BASF after Credit Suisse and Kepler cut their price targets on the chemicals company.

German utilities E.ON and RWE both fell more than 1 per cent with traders citing longer than expected talks over how to share the costs of the country's exit from nuclear power.

Ireland's benchmark equity index rose 1.6 per cent. Two of the country's biggest parties said they would each try to form their own government over the next 10 days following an inconclusive election.


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