Europe: Shares rally to near 2-month highs on US-China trade reprieve

[BENGALURU] European shares surged on Monday to their highest in nearly two months, led by trade-sensitive technology stocks after the United States and China agreed to restart trade negotiations.

The pan-European Stoxx 600 index rose 0.8 per cent on broad-based gains, with the Stoxx 50 index of Europe's biggest stocks rising 1.3 per cent to its highest level since February 2018 before closing 0.7 per cent higher.

At a meeting on the sidelines of the G-20 summit, President Donald Trump offered concessions to his Chinese counterpart Xi Jinping including no new tariffs and reducing restrictions on tech company Huawei.

From its side, China agreed to make unspecified new purchases of US farm products and restart negotiations after the last round collapsed in May.

Stocks across the globe rose on the news, with the S&P 500 hitting record highs.

In Europe, Frankfurt's trade-sensitive DAX rallied 1 per cent, the most among the major European indexes, while the tech index rose 1.9 per cent as chipmakers were boosted by the Huawei relief.

Infineon, Siltronic, ams AG, STMicroelectronics and ASM International rose between 3.7 per cent and 5.6 per cent.

The blue-chip Swiss index gained 0.7 per cent despite stocks being blocked from trading on EU exchanges after talks to resolve a dispute between Brussels and Switzerland collapsed.

"TEMPORARY RELIEF RALLY"

The breakthrough in trade talks helped the Stoxx 600 index start the second half of the year on a strong note, after posting its biggest first half yearly gains since 1998 on Friday.

After a sell-off in May that marked its weakest monthly performance in over two years, the main index climbed 4.2 per cent in June on hopes that major central banks would be more accommodating to counter the negative effects of a trade war that has lasted for months.

But analysts warned against excessive optimism given no deadline was set for progress on a deal, and both parties remain at odds over significant parts of an agreement.

"Markets are seeing a temporary relief rally (from the trade truce). But, it needs to be more than that to sustain it, I think," said Edmund Shing, global head of equity derivatives strategy, BNP Paribas

"Even if you don't get a deal, you need to see some progress."

Atlantia fell 3.2 per cent and was among the few decliners on the Stoxx 600 as it battled with the ruling 5-Star party over selectively leaking a government report to revoke the group's national toll-road concession that accounts for a third of its core profits.

REUTERS