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Trade optimism, upbeat earnings send European shares to four-year peak

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11/07/2019 | 12:17pm EST
The German share price index DAX graph at the stock exchange in Frankfurt

European shares rose for a fifth straight session on Thursday to hit fresh four year highs as investors cheered signs of progress in U.S.-China trade talks and largely positive earnings reports from a host of companies.

Shares of Siemens hit their highest in more than a year after the German industrial company beat fourth-quarter profit expectations, while Italy's biggest bank UniCredit rose 6% after announcing its first share buyback in more than a decade after solid third-quarter earnings.

Lufthansa jumped 6.8% on plans to cut costs at some of its units to revive profit. The German airline's shares helped boost the wider travel and leisure index by 1.3%, making it one of the top gainers among the major European sub-sectors.

On the trade front, China's commerce ministry said the world's two economic giants were working on a deal that would roll back trade tariffs in different stages.

"There are still hurdles to be overcome but it is encouraging that, contrary to last spring, Chinese negotiators are sending more positive signals, as well their U.S. counterparts," said Raoul Leering, head of international trade analysis at ING.

The news sparked a broad-based rally in Europe, while Wall Street was pushed to a record high. Trade-sensitive Frankfurt shares rose 0.8% to close at their highest level since February 2018.

It also helped investors shrug off another weak data point from Germany showing industrial output fell more than expected in September.

London's FTSE 100 rose 0.1% as the pound weakened after two Bank of England officials voted to lower interest rates on Thursday, contrary to expectations of a unanimous decision to hold rates.

"That suggests that the Bank is very unlikely to follow through with its signalled rate hikes (if Brexit goes smoothly) any time soon," ING's developed markets economist James Smith said.

But a 9.7% tumble in insurer Hiscox on brokerage downgrades and a 2.7% slip in London Stock Exchange Group after it said it would consult with members regarding a shorter trading day, saw the FTSE post the smallest gains among regional peers.

The FTSE midcap index and Irish stocks gained 1.1% and 1.3%,respectively.

The pan-European STOXX 600 index closed up 0.4%. It is now a little over 2% away from its record high hit in April 2015.

Among the top gainers across European sub-sectors were automakers and miners, while defensive plays such as telecoms and utilities <.SX6P> fell, suggesting higher risk appetite.

The world's largest steelmaker ArcelorMittal jumped 6.7% on better-than-expected results. Shares in wind turbine maker Vestas rose 11% to the top of the STOXX 600 after it reported forecast-beating quarterly operating profit.

French gas and power group Engie posted its worst day in more than eight months on less optimistic guidance, taking the utility sector <.SX6P> down 1.9% for its worst day in a month.

By Susan Mathew

Stocks mentioned in the article
ChangeLast1st jan.
ARCELORMITTAL 0.32% 16.152 Delayed Quote.-11.25%
ENGIE -1.10% 14.44 Real-time Quote.16.57%
EURO STOXX 50 -0.54% 3672.61 Delayed Quote.23.02%
FTSE 100 INDEX 0.28% 7234.11 End-of-day quote.0.00%
HISCOX LTD -0.29% 1360 Delayed Quote.-15.85%
HUDSON'S BAY COMPANY 0.33% 9.16 Delayed Quote.25.24%
LONDON STOCK EXCHANGE PLC -0.15% 6780 Delayed Quote.67.16%
LUFTHANSA GROUP AG -0.91% 16.865 Delayed Quote.-13.60%
SIEMENS AG -0.77% 115.9 Delayed Quote.19.94%
STOXX EUROPE 600 -0.24% 406.36 Delayed Quote.20.64%
UNICREDIT S.P.A. 2.99% 12.744 End-of-day quote.28.87%
VESTAS WIND SYSTEMS -0.84% 663 Delayed Quote.35.87%
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