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Europe: Decisive UK election, trade deal lift shares close to record high

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A breakthrough in US-China trade talks and hopes of an orderly Brexit after a landslide election victory for UK Prime Minister Boris Johnson lifted Europe's benchmark share index to within striking distance of an all-time high on Friday.

[BENGALURU] A breakthrough in US-China trade talks and hopes of an orderly Brexit after a landslide election victory for UK Prime Minister Boris Johnson lifted Europe's benchmark share index to within striking distance of an all-time high on Friday.

China and the United States have agreed on the text of a "phase one" trade deal, Beijing said on Friday. China said it had agreed to step up purchases of US agricultural products, while US President Donald Trump said Washington would suspend tariffs on Chinese imports scheduled for Sunday.

The pan-European STOXX 600 closed up 1.1 per cent, buoyed by the major step forward in resolving a trade war that has hit global supply chains and roiled markets for over 16 months.

The UK-focused FTSE mid-cap index jumped 3.4 per cent, after touching a record high earlier in the session, as the Conservative Party's election win raised hopes Mr Johnson will deliver Brexit within weeks, ending three and a half years of uncertainty and fears of a disorderly break with the European Union (EU).

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"Two of the biggest stumbling blocks for European markets have been removed on the same day," said Peter Dixon, chief UK economist at Commerzbank.

The benchmark European index closed just shy of a record high hit in 2015. It is also on track to end the year more than 20 per cent higher, its biggest annual gain in a decade.

But, stocks pared some early gains as investors took in the trade news with caution, as the deal is yet to be signed.

Export-reliant German stocks closed up 0.5 per cent well-off session highs, held back also by a 3.7 per cent slump in Henkel as it warned of a dip in operating margin at its adhesives business next year.

London's blue-chip FTSE 100 advanced 1.1 per cent as gains in banks and consumer goods helped the export-heavy index shrug off the impact of a surge in sterling, which typically weakens sentiment towards internationally focused companies.

"Completing the Brexit process remains a Herculean task that will take considerably longer than the eleven months currently planned, but in the near-term we are likely to see UK equities move higher alongside sterling," said Karen Ward, chief market strategist, EMEA, at JP Morgan Asset Management.

The European travel and leisure index added 3.6 per cent, boosted by rallies in Brexit-sensitive airline stocks such as easyJet, International Consolidated Airlines Group, and Ryanair Holdings.

Dublin's ISEQ, also considered a barometer of Brexit sentiment, jumped to a 12-year high.

Italian shares, however, closed 0.3 per cent lower, as the banking index dropped 1.4 per cent to log its worst day in a month. Prime Minister Giuseppe Conte said there was no need for state to help any Italian bank at present.

In corporate news, Delivery Hero gained more than 23.3 per cent as it agreed to buy South Korea's top food delivery app operator Woowa Brothers for US$4 billion and form a joint venture.

REUTERS