Markets

European stocks close higher as 'phase one' trade deal boosts sentiment; Stoxx 600 hits record high

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Key Points
  • Washington and Beijing announced on Friday that an agreement had been reached pending legal procedures, a significant step forward after a bruising 18-month trade war.
  • U.S. Treasury Secretary Steven Mnuchin told CNBC on Saturday that the deal would be signed in early January and that phase two may then be negotiated in stages.

European stocks traded sharply higher Monday after the U.S. and China agreed a 'phase one' trade deal, offering some optimism for risk assets.

The pan-European Stoxx 600 closed higher by almost 1.5% during trade, surpassing 418 to hit an all-time high. Basic resources led the way with 2.3% gains as all sectors and major bourses traded firmly in positive territory.

Washington and Beijing announced on Friday that an agreement had been reached pending legal procedures, a significant step forward after a bruising 18-month trade war.

However, questions have been raised by market participants over some details of the deal which remain hazy, notably the scale of agricultural purchases and the prospect of China balancing bilateral trade flows.

U.S. Treasury Secretary Steven Mnuchin told CNBC on Saturday that the deal would be signed in early January and that phase two may then be negotiated in stages.

Asian stocks were mixed Monday with mainland Chinese stocks jumping on the back of better-than-expected industrial output data, while indexes in Japan and Hong Kong edged downwards.

Back in Europe, British Prime Minister Boris Johnson will welcome 109 new Conservative lawmakers to parliament on Monday, promising to move forward swiftly with Brexit and to increase funding to the National Health Service (NHS).

In corporate news, Reuters reported Sunday that China's BAIC plans to double its stake in German automaker Daimler in a bid to win a board seat and challenge rival Geely.

On the data front, IHS Markit euro zone flash composite PMI estimates for December was recorded in line with expectations at 50.6, with service sector outperformance offsetting more disappointing manufacturing numbers.

Manufacturing PMIs came in at 45.9 against a forecast of 47.3, down from 46.9 in November.

U.K. flash readings showed that both the services and manufacturing sectors had declined more sharply than expected in December. Composite PMI came in at 48.5, its lowest level since mid-2016, suggesting the world's fifth-largest economy is on course to contract in the fourth quarter

Stocks on the move

Royal Mail stock climbed almost 7% during the session, closely followed by a 6.75% gain for finacial services firm Hargreaves Lansdown as U.K. domestic shares continued to benefit from an expected easing of Brexit uncertainty.

Electrolux shares plummeted 10.6% after the Swedish home appliance company issued a profit warning owing to the costs of its U.S. manufacturing transition.

Tullow Oil tumbled 9.1% as the British energy giant continues to be blighted by problems with its Ghanaian operation.

Shares of Italian banks edged higher across the board after the government approved a bailout of unlisted co-operative lender Popolare Di Bari.