Europe: Shares touch all-time high as trade, Brexit fog clears

[BENGALURU] European shares hit record highs on Monday, rising for the fourth successive session as a preliminary US-China trade deal helped extend a rally sparked by the British Conservative Party's election victory.

London's FTSE 100 jumped 2.3 per cent, leading gains among regional indexes, as investors took British Prime Minister Boris Johnson's election triumph last week as a signal to buy back into a market that has underperformed on concerns over Brexit.

Shares of big dollar earners such as British American Tobacco, Glencore and BHP rose between 3 per cent and 5 per cent. Banks exposed to Brexit uncertainties, including Royal Bank of Scotland and Barclays also rose.

Bearish bets unwound even as the pound, whose gains tend to weigh on the exporter-heavy FTSE 100, extended its rise to above 1.33 per dollar.

"We are witnessing a realignment of British politics and investment," Steven Holden, CEO of Copley Fund Research, wrote in a note to clients. "Down in the dumps and forgotten British brands are suddenly positioned to ride a wave of new-found confidence."

Gains for London, along with general optimism over the US-China trade deal, drove the pan-European Stoxx 600 index to a record high. The index was up 1.4 per cent at 417.75, logging a new closing high.

"I think we have seen the majority of the good news being priced in today, we would now need new input for further significant gains," said Teeuwe Mevissen, senior market economist at Rabobank in Amsterdam.

Trade-sensitive miners rose after Washington said a "phase one" US-China trade deal will nearly double US exports to China over the next two years and is "totally done".

Germany's DAX lagged its European peers, with automaker Volkswagen weaker.

Markit's Purchasing Managers' index, released earlier, showed German private sector activity shrank for the fourth successive month in December as a downturn in manufacturing offset services sector growth.

Investors also overlooked lacklustre data from the euro zone and the United Kingdom as the focus remained on trade and Brexit - two factors that have weighed on global markets this year.

Swedish appliance maker Electrolux AB tumbled 10.6 per cent after warning that its North American business would take a bigger-than-expected hit, partly because of costs from its move into a new plant in South Carolina.

Tullow Oil slid 10.2 per cent after S&P Global downgraded its long-term credit rating, days after the company's chief executive officer stepped down and it scrapped its dividend.

REUTERS