Europe: Stocks rally 1% on trade hopes, FTSE lags

[BENGALURU] Euro zone stock markets charged higher on Thursday, as optimism over US-China trade talks, positive corporate updates and a rally in banking shares brightened the mood in Europe even as London stocks went in the opposite direction.

A surge in tariff-sensitive shares of tech firms, automakers and energy companies drove an index of euro zone stocks 1.0 per cent higher at the close, compared with a 0.7 per cent rise in the broader European stock index.

News that Beijing and Washington officials agreed to hold high-level trade talks in early October raised hopes of progress in their negotiations even as both sides fired tariffs on each others' goods last month.

Britain's FTSE 100 was a weak spot, falling -0.6 per cent as several large-cap names traded ex-dividend and exporters on the index took a hit from a surge in sterling.

Investors have cheered political developments this week, with the formation of a new government in Italy and the UK parliament's battle to avert a no-deal Brexit lifting the Stoxx 600 to a fresh one-month high.

"The bullish theme seen elsewhere comes off the back of an improved outlook for US-China talks, which are planned for October," Joshua Mahony, senior market analyst at IG, wrote in a client note.

"However, we have seen this all before, so there is a strong chance that market scepticism kicks in to limit these gains."

Automakers and parts suppliers index led gains on the main index with a 2.9 per cent jump to record its biggest percentage gain since July 23.

BANKS RISE

Banking shares also rose more than a percent for a second day as eurozone bond yields rose in the wake of strong US private data and comments this week by ECB officials playing down the need for aggressive stimulus at next Thursday's policy meeting.

Bank of Ireland Group jumped 8.5 per cent to the top of the index, while gains for Spanish lenders and a 7.3 per cent rise in Finland's Nordea on naming a new chief executive boosted the sector.

French engine maker Safran gained 5.1 per cent after the company raised its full-year profit forecast, while Dassault Aviation rose 5.7 per cent after the maker of Rafale warplanes and Falcon business jets affirmed its view of higher net sales in 2019.

Together they helped drive a 1.4 per cent increase in the industrial goods and services sector.

Shares in Thyssenkrupp AG tacked on 6.2 per cent on a report that Finland's Kone was considering teaming up with a private equity partner to pull off a bid for the German conglomerate's elevator business.

The gains came despite news the company is set to drop out of Germany's benchmark GDAXI index this month.

Norwegian shares got a boost from a 7.5 per cent jump in Equinor's shares after the oil firm launched a US$5 billion share buyback and said its Johan Sverdrup oilfield will come on stream in October, a month earlier than planned.

Equinor's shares notched their biggest percentage gain since February 2016, while other Nordic oil firms such as Aker BP and Lundin Petroleum rose between 2.7 per cent and 4.7 per cent.

REUTERS