Trade Deal Optimism, Brexit Breakthrough Boost European Indexes

Past meetings between Liu and Trump this year have yielded positive progress on trade. For example, after their meeting in January, China increased its soybean buying. And their February meeting resulted in a delay in tariffs.
James Hyerczyk
European Shares

Strong stock market performances in the U.S. on Thursday and in Asia early Friday carried over to the European session with its major indexes posting solid gains. The catalysts behind the strength are optimism over U.S.-China trade negotiations with investors hoping for at least a partial deal between the two economic powerhouses and positive developments over Brexit.

At 09:47 GMT, the UK’s FTSE is at 7201.55, up 15.19 or +0.21%. Germany’s DAX is trading 12388.55, up 224.35 or +1.84 and France’s CAC is at 5631.71, up 62.66 or 1.13%.

US-China Relations

Besides the carryover strength from the U.S. and Asia, European shares were boosted by comments from President Trump, who characterized high-level trade discussions between the U.S. and China as “very, very good” and plans to meet with Chinese Vice Premier Liu He at the White House on Friday.

On the back of that comment, Alex Wong, director of asset management at Ample Capital, told CNBC’s “Street Signs” on Friday, “The best scenario probably would be just a partial deal, I think.”

Wong furthered added, “I don’t think we (will) see a very strong outcome today.”

Past meetings between Liu and Trump this year have yielded positive progress on trade. For example, after their meeting in January, China increased its soybean buying. And their February meeting resulted in a delay in tariffs.

Positive Developments over Brexit

European shares were also underpinned after positive comments on Brexit from the leaders of the Republic of Ireland and the U.K.

U.K. Prime Minister Boris Johnson met with his Irish counterpart Leo Varadkar for further Brexit talks Thursday afternoon, with subsequent comments encouraging investors to buy shares.

“The Prime Minister (Johnson) and Taoiseach (Varadkar) have a detailed and constructive discussion,” the joint statement said.

“Both continue to believe that a deal is in everybody’s interest. They agreed that they could see a pathway to a possible deal.”

Additionally, Irish Prime Minister Leo Varadkar said a Brexit deal could be clinched by the end of October to allow the U.K. to exit the European Union in and orderly manner.

U.K. Brexit secretary Stephen Barclay is in talks with the EU’s chief Brexit negotiator Michel Barnier on Friday.

Finally, J.P. Morgan said Friday it had lifted its outlook for the chances of a Brexit deal from 5% to 50%.

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