Europe ends, raised by the US-Mexico agreement

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EUROPEAN BURSARIES MELT IN MODERATE GROWTH

by Veronique Tison

PARIS (Reuters) – European stock markets closed moderately on Monday, benefiting from the renewed risk appetite favored by the agreement reached between the United States and Mexico, which for now avoids the opening of a new front in the war commercial, even if it does not mitigate the fears for the economy.

In Paris, the CAC 40 closed 0.34% at 5.382,50 points, adding a 3% progression last week. The British Footsie has gained 0.59% and the Italian FTMib 0.61%.

The EuroStoxx 50 index rose by 0.24%, the FTSEurofirst 300 by 0.26% and the Stoxx 600 by 0.21%.

The German and Swiss stock exchanges remained closed for Pentecost Monday.

The United States and Mexico presented an agreement on Friday that Mexico pledged to take "strong" measures to stem the flow of Central American migrants to the US border, which prompted Washington to give up taxing all 5% on Monday products imported from its southern neighbor.

The news has at least temporarily alleviated investors who are increasingly concerned about the potential consequences of raising tariff barriers, as the G20 finance ministers and central banks in Japan pointed out over the weekend. .

"Markets are a party," commented Jim Reid, strategist at Deutsche Bank. "There is a sense of relief in avoiding tariffs (against Mexico) and some are in favor of Trump's (Donald) propensity to make deals after creating turmoil." They want to believe that a similar situation could happen with China. "

Equity markets were also supported by the prospect of an easing of US monetary policy in the coming months, a scenario that confirmed figures significantly lower than expected on employment in the United States in May on Friday.

VALUES

The value of the main resources, sensitive to global trade, recorded the best sectorial results in Europe with a gain of 1.20%. ArcelorMittal, up 4.46%, has overtaken CAC 40 in Paris and FTSEurofirst 300 in Europe.

In second place, the banking sector (+ 1.10%) recovered the color with the increase in bond yields. BBVA, ING Groep and Santander won the first three seats of EuroStoxx 50.

The automotive sector, up 0.67%, was supported by Reuters and reports that Renault and Fiat Chrysler Automobiles are trying to re-launch their merger project. The first earned 2.59% in Paris and the second 1.73% in Milan.

In London, BAE Systems obtained 1.89% in reaction to the US-Raytheon merger project in the United States, which revives speculation about mergers and acquisitions in the defense and aeronautics field.

The biggest increase in the Stoxx 600 was for another Briton, the online trading specialist Ocado, who gained 4.67% after announcing a diversification into "vertical agriculture".

Excluding the index, the tour operator Thomas Cook rose by 17.10% after reporting contacts with the Chinese Fosun Tourism, owner of Club Med, for a possible survey of the activities of his tour operator.

A WALL ROAD

The Wall Street indices also benefit from the Mexico-US agreement: at the time of the European closing, the Dow Jones gained 0.75%, the S&P 500 almost 1% and the Nasdaq Composite 1.77%.

The values ​​displayed in Mexico, such as the car makers or the spirits group Constellation Brands, owner of the Corona beer, stand out, but Raytheon (+ 1.78%) has just benefited from the announcement of its merger plans with United Technologies (-1.68%), on which President Donald Trump expressed reservations.

Eight of the 11 main S & P sector indices are in the green, driven by the consumer discretionary (+ 1.97%), technology (+ 1.84%) and financials (+ 1.46%).

INDICATORS OF THE DAY

No important indicator was on the agenda in the United States.

In Europe, the monthly gross domestic product in the United Kingdom showed a stronger contraction of 0.4% than expected in April, after a 0.1% decrease in March. As for foreign trade, British imports fell by 14.4% in volume compared to March and exports fell by 10.9%.

In Asia, Chinese foreign trade figures showed a recovery of 1.1% of exports in May in a year, but a drop in imports of 8.5%. The bilateral trade surplus with the United States has reached its highest level in four months.

In Japan, growth in the first quarter was revised to 2.2% on an annual basis, compared to 2.1% in the first estimate.

EXCHANGE

The renewed appetite for risky assets is accompanied by an increase in the dollar, especially against the yen (-0.3%), which is taking profits after taking advantage of its safe haven status last week.

The euro, which rose to a maximum of 1,1348 dollars last week from March, fell by 0.2%, further penalized by Reuters according to which European Central Bank (ECB) officials are open to the possibility of a rate cut if economic growth weakens during the year and if the impact of the strength of the euro adds to the shock of trade conflicts.

The pound fell 0.4% against the dollar, weakened by the UK's GDP in April.

The dollar index, which measures the value of the greenback against six reference currencies, rose 0.36% to 96,889.

On the emerging market side, the Mexican peso is gaining around 2% against the dollar after Friday's trade agreement, but the yuan has fallen to its lowest level since the beginning of December, near the threshold of seven per dollar, in response to a decline in Chinese imports in May.

RATE

The bullish movement in the equity markets was accompanied by an increase in European government bond yields after last week's sharp decline. Germany's 10-year yield, which remained five consecutive declining sessions, returned 3.8 basis points to -0.22% at the end of the day, while the 30-year OAT reported a decline of 1, 1 bp – its biggest increase since December 2017 – after nine days of decline.

This growth comes in the wake of US Treasury yields, including the ten-year rise to 2.14% after hitting a minimum from September 2017 to 2.053% on Friday.

OIL

Oil prices have hardly changed since the end of Europe, US light crude oil maintains a gain of 0.1% while the North Sea Brent drops 0.65%, below 63 dollars.

OR

The return of risk appetite and the rise in the dollar pushed gold by 0.9% to $ 1,328.73 per ounce, after the 14-month peak reached Friday at 1.348.1, near at the important resistance of $ 1,350.

THINGS TO LOOK FOR TUESDAY:

In the United States, producer price statistics will provide a first glance at May's inflation, but markets are mainly expecting consumer prices on Wednesday and retail sales on Friday.

(Edited by Blandine Hénault)

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