The Financial Express

European shares hit record as trade, Brexit fog clears

| Updated: January 02, 2020 12:52:43

European shares hit record as trade, Brexit fog clears

European shares hit an all-time high on Monday as a “totally done” initial trade deal between the United States and China kept the momentum rolling after a rally last week spurred by Britain’s Conservative election win, reports Reuters.

London's FTSE 100 jumped 2.1 per cent in broad-based gains as investors took Prime Minister Boris Johnson's victory in last week's election as an opportunity to buy back into a market that has underperformed on concerns over Brexit.

Shares of big dollar earners such as British American Tobacco, Glencore and BHP rose between 3.0 per cent and 5.0 per cent, while banks exposed to Brexit uncertainties including Royal Bank of Scotland and Barclays  gained about 4.0 per cent.

The unwinding of bearish bets came even as the pound, whose gains tend to weigh on the exporter-heavy FTSE 100, extended its rise to above 1.33 per dollar.

“We are witnessing a realignment of British politics and investment,” said Steven Holden, CEO of Copley Fund Research, wrote in a note to clients. “Down in the dumps and forgotten British brands are suddenly positioned to ride a wave of newfound confidence.”

Gains for London, along with general optimism over the direction of the US-China trade deal, drove the pan-European STOXX 600 index to a record high. The index was up 1.10 per cent at 416.56, surpassing the previous high hit in April 2015.

Trade-sensitive miners .SXPP were the top gainers after US Trade Representative Robert Lighthizer said over the weekend that a “phase one” US-China trade deal will nearly double U.S. exports to China over the next two years and is “totally done”.

Germany’s DAX .DAXI lagged its European peers, however, with automakers such as Volkswagen and Daimler weaker.

Markit’s Purchasing Managers’ index released earlier showed German private sector activity shrank for the fourth month running in December as a downturn in manufacturing offset services sector growth.

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