European shares gain on Trump tariff
relief, carmakers shine
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[June 11, 2019]
By Tom Wilson
(Reuters) - European shares gained ground
on Tuesday, with Germany's carmakers outperforming, as risk appetite
held firm after the United States stepped back from imposing tariffs on
The pan-European STOXX 600 climbed 0.62%, on course for a sixth day of
gains in the last seven, with Frankfurt's DAX racing up 1.2% as German
investors returned from a one-day holiday.
There, BMW, Daimler and VW - seen as sensitive to trade tariffs - all
gained between 1.8%-2%, mirroring a 1.9% gain for the auto sector.
Investors have breathed easier this week after the United States and
Mexico reached a deal on Friday to avert tariffs threatened by U.S.
President Donald Trump if steps were not taken to curb the flow of
mostly Central American migrants.
That eased - for now at least - fears that the United States would find
itself in a trade war with another of its largest commercial partners,
adding to the dispute with China.
Trump said on Monday he may impose more tariffs on Chinese imports if he
cannot make progress in talks with President Xi Jingping at a Group of
20 summit in Japan later this month.
Market participants said that investors would have to wait until the G20
summit, scheduled for June 28-29, for clear signs of how the spat would
In the meantime, stocks are likely to be buoyed by expectations of a cut
in rates by the U.S. Federal Reserve. Markets have priced in a cut by
"It looks like we will have to wait to see at the end of the month, to
see what the next move will be," said David Madden, an analyst at CMC
Markets. "In that time, if nothing is said, stocks could press on higher
– the belief that the Fed will all of a sudden become dovish is really
The MSCI world equity index, which tracks shares in 47 countries,
advanced 0.24%. Wall Street futures were also seen opening higher, with
S&P500 mini futures up 0.26%.
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan
gained 0.9%, with Shanghai's bourse climbing 2% after China tweaked
policy on major investment projects in an attempt to support its slowing
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Bourses in Australia, South Korea and Japan also gained.
The dollar held steady above a 2-1/2 month low against a basket of
currencies, with rising expectations for a Fed rate cut tempered by
a reluctance to close positions before the G20.
The dollar index nudged down 0.03% to 96.747 after advancing 0.2% on
"The markets are pricing in a 25-basis-point rate cut in July," said
Peter Schaffrik, head of European rates strategy at RBC Capital
Markets, adding that expectations of looser policy would likely
"When you see the narrative that the market is painting, that it is
all down to the negative implications from the trade war and the
reduction of global trade," he said. "It's difficult to see how any
one data point will change the entire picture."
Amid the cautious optimism, a rally in longer-dated euro zone
government bonds stalled as the pick-up in risk sentiment globally
sparked a sell-off in the bloc.
Germany's 10-year bond yield, seen as a benchmark for government
debt, was up 3 basis points at minus 0.23% - still a smidgeon away
from last week's record lows.
Thirty-year bond yields in Germany and France were up as much as 8
basis points in early trade.
In commodities, oil prices rose, bolstered by firmer financial
markets and expectations that producer group OPEC and its allies
will keep withholding supply. Brent crude futures were at $62.67 at
0741 GMT, up 0.4%.
(Reporting by Tom Wilson; Editing by Andrew Cawthorne)
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