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EUROPE MARKETS: German Stocks Close At 5-week Peak After EU-U.S. Trade Truce; Europe Stocks Rally

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07/26/2018 | 12:10pm EDT

By Carla Mozee and Victor Reklaitis, MarketWatch

Juncker-Trump meeting 'went better than anyone could have expected,' analyst says

German stocks finished at a five-week high Thursday, leading European equity markets upward, with shares in auto makers finding relief after the European Union's top official struck a truce on trade issues with U.S. President Donald Trump.

Stocks held to higher ground after the European Central Bank left interest rates unchanged and affirmed its plan to end its monthly bond-buying program in December .

What markets are doing

Germany's DAX 30 index leapt 1.8% to finish at 12,809.23, notching its highest close since June 18, according to FactSet data.

The surge in German stocks helped push the Stoxx Europe 600 index up by 0.9% to end at 390.53. The pan-European index on Wednesday dropped 0.3% .

France's CAC 40 index rose 1% to close at 5,480.55, while the U.K.'s FTSE 100 index edged up by less than 0.1% to end at 7,663.17.

Check out:European luxury stocks face a 30% drop in an all-out trade war, says UBS (https://www.google.co.uk/amp/s/www.marketwatch.com/amp/story/guid/49BF7352-8F58-11E8-8FEE-CBB48482743B)

The euro fell below $1.17 in afternoon trade, and was recently trading around $1.1659. That is down from $1.1729 late Wednesday in New York.

What's driving the market

Shares of auto makers were among top price performers after European Commission President Jean-Claude Juncker and Trump said following the European trading close on Wednesday that they had agreed to work toward "zero tariffs" and "zero subsidies on non-auto industrial goods ." Trump had threatened to impose tariffs on European autos but said he'll hold off on any retaliation as long as discussions continue.

Trump, who met with Juncker at the White House, also said the EU would buy more U.S. soybeans and that he would work on resolving tariffs on European steel and aluminum. Trump, who recently called the EU a "foe" of the U.S ., tweeted a message of "love" toward the bloc on Wednesday:

(https://twitter.com/realDonaldTrump/status/1022267646119763970)

Read more:Trump hails 'big day' for free trade as he strikes tentative pact with EU chief

The "Donald Trump versus Jean-Claude Juncker face-off...went better than anyone could have expected," said Connor Campbell, financial analyst at Spreadex, in a note. "While there isn't exactly much substance to what was announced, with the fact the relationship didn't worsen being more notable than the plans to negotiate, it was enough to lift the spirits of the previously fearful markets."

Don't miss:Even if short on specifics, the Trump-Juncker agreement is significant

European Central Bank President Mario Draghi at a Thursday news conference said the EU-U.S. trade talks are "a good sign," but it's too early to assess the full extent of the agreement struck by Juncker and Trump.

The euro, however, fell as Draghi said the central bank still expects interest rates to be held at their current levels at least through the summer of 2019.

What are strategists saying?

"There was a little chance that Draghi could somewhat clarify the ECB's definition of 'through the summer of 2019,' as there had been some speculation in markets on where the ECB would see the end of the summer, hence when there would be the first theoretical opportunity for a rate hike," said Carsten Brzeski, chief economist covering Germany and Austria, at ING, in a note.

"Here, Draghi dodged the question, which in our view means that a first rate hike is still so far away for the ECB that it feels comfortable with some uncertainty in markets," he said.

Stock movers

The Stoxx Europe 600 Automobiles & Parts Index climbed 2.6%, with Volkswagen AG up by 4%, Fiat Chrysler Automobiles rising 3.5%, and BMW AG (BMW.XE) gaining 4.4%. Renault moved up 1.5% and Daimler rose 2.8%.

Daimler posted a sharp drop in second-quarter profit to 1.73 billion euros ($2.02 billion), as tariffs related to the U.S.'s trade conflict with China hurt Mercedes-Benz Cars and as the company booked a big charge in Germany. Daimler also said it's planning to reorganize to consolidate its business divisions from five to three: Mercedes-Benz AG, Daimler Truck AG and Daimler Mobility AG.

Airbus SE surged 4.5% after the aircraft maker said second-quarter profit nearly doubled to 1.2 billion euros ($1.4 billion), but the company did trim its full-year outlook.

Cobham sank 9.9% after the British aerospace-and-defense engineer said Boeingis withholding payment over the KC-46 aircraft refueling tanker program. But Cobham did back its underlying profit guidance for 2018.

Stocks mentioned in the article
ChangeLast1st jan.
AIRBUS SE 0.63% 131.96 Real-time Quote.57.17%
BOEING COMPANY (THE) 1.87% 369.52 Delayed Quote.12.48%
CAC 40 -0.76% 5571.71 Real-time Quote.17.92%
COBHAM PLC -0.38% 117.85 Delayed Quote.20.60%
DAIMLER AG -1.47% 46.13 Delayed Quote.0.48%
DAX -0.72% 12341.03 Delayed Quote.16.88%
EURO STOXX 50 -0.56% 3501.58 Delayed Quote.16.69%
FIAT CHRYSLER AUTOMOBILES 0.07% 12.188 End-of-day quote.-3.96%
FTSE 100 INDEX 0.28% 7234.11 End-of-day quote.0.00%
LME ALUMINIUM CASH 0.44% 1818 End-of-day quote.-2.15%
RENAULT -0.78% 52.18 Real-time Quote.-4.34%
SOYBEAN MEAL FUTURES (ZM) - CBE (ELECTRONIC)/C1 -0.39% 307.2 End-of-day quote.1.76%
SOYBEANS FUTURES (ZS) - CBE (ELECTRONIC)/C1 -0.65% 882 End-of-day quote.3.48%
VOLKSWAGEN AG -1.21% 153.06 Delayed Quote.10.18%
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