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European shares rise amid Brexit tussle as focus shifts to earnings

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10/22/2019 | 08:00am EST
The German share price index DAX graph at the stock exchange in Frankfurt

(Reuters) - European shares broke a three-day run of losses on Monday, as investors stuck to hopes that Britain will avoid a disorderly exit from the European Union, while positive corporate updates and comments on U.S.-China trade talks added to the upbeat mood.

The pan-European STOXX 600 index <.STOXX> ended the session 0.6% higher, barely budging on news House of Commons speaker John Bercow refused to allow a vote on Prime Minister Boris Johnson's Brexit divorce deal, saying the same issue had been discussed on Saturday.

A spokesman said the government would now introduce Brexit legislation this week. Lawmakers on Saturday forced the British government to seek a delay to the Oct. 31 deadline, which analysts said reduced the chances of a no-deal Brexit.

London's blue-chip FTSE 100 was up 0.2%, lagging the broader markets due to a strong pound, while the FTSE mid-cap index of domestically focused stocks <.FTMC> closed up 0.4%.

"The chances of a deal one way or the other are higher than they were two weeks ago, which is why the market is not falling back," said Rupert Thompson, head of research at Kingswood Group.

"The way it would be, we're more than half way through if you actually saw the deal being approved by the Parliament."

Germany's GDAXI <.DAX> jumped 0.9%, leading gains among major regional indexes.

Business software group SAP's shares gained 2.5% after saying it had reached a three-year deal with Microsoft to help its enterprise customers move their business processes into the cloud. The company also reiterated its forecast for the year and through to 2023.

DEFENSIVE SECTORS

German payments company Wirecard jumped 6% on news the firm was hiring KPMG to conduct an independent audit to address allegations in the Financial Times that its finance team had sought to inflate its reported sales and profits.

Most sub-sectors were in the black, led by miners <.SXPP> and banks <.SX7P>, but defensive sectors including healthcare <.SXDP> and real estate <.SX86P> lagged the broader market.

Aiding sentiment, a White House official said that U.S. tariffs scheduled for December on Chinese goods could be withdrawn if negotiations continue to go well.

Investors will be scanning third-quarter report cards from European firms to assess their health amid lingering Brexit and trade uncertainties. UK-listed RBS and Barclays are scheduled to report this week, kicking off bank earnings.

Companies listed in STOXX 600 are expected to report a 3.7% drop in third-quarter earnings, worse than the 3% fall expected a week ago, according to Refinitiv IBES data.

However, early reports were positive, with shares of Swedish engineering firm Atlas Copco jumping nearly 10% to the top of STOXX 600 after it reported forecast-beating third-quarter earnings and order bookings on strong demand from chipmakers.

By contrast Smith+Nephew sank 9% after the medical device maker said its Chief Executive Namal Nawana was stepping down after just 17 months in the role.

Meanwhile, the Berlin government's move to freeze rents put real estate companies such as Deutsche Wohnen, Ado Properties and Vonovia under pressure. Their shares fell between 1% and 2.6%.

(This story corrects story filed on Monday, saying name of the firm in paragraph 5 is "Kingswood Group" not "Henderson Rowe")

(Reporting by Sruthi Shankar and Agamoni Ghosh in Bengaluru; Editing by David Holmes)

By Sruthi Shankar

Stocks mentioned in the article
ChangeLast1st jan.
ADO PROPERTIES -0.34% 35.18 Delayed Quote.-22.72%
ATLAS COPCO AB -0.54% 351.3 Delayed Quote.67.79%
BARCLAYS PLC 3.12% 171.64 Delayed Quote.14.03%
DEUTSCHE WOHNEN SE 0.27% 33.27 Delayed Quote.-16.83%
EURO STOXX 50 -0.08% 3696.82 Delayed Quote.23.26%
FTSE 100 INDEX 0.28% 7234.11 End-of-day quote.0.00%
MICROSOFT CORPORATION 0.10% 146.11 Delayed Quote.43.85%
SAP AG 0.23% 123.54 Delayed Quote.42.11%
SMITH & NEPHEW PLC -0.91% 1636.5 Delayed Quote.11.78%
STOXX EUROPE 600 -0.02% 405.34 Delayed Quote.20.07%
THE ROYAL BANK OF SCOTLAND GROUP PLC 4.04% 221.6 Delayed Quote.2.26%
VONOVIA SE -0.58% 46.01 Delayed Quote.16.22%
WIRECARD AG 3.27% 119.85 Delayed Quote.-9.75%
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