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GLOBAL MARKETS-European stocks hit one-month highs on news of U.S.-China trade talks

Published 05/09/2019, 09:50
Updated 05/09/2019, 10:00
© Reuters.  GLOBAL MARKETS-European stocks hit one-month highs on news of U.S.-China trade talks

* Investors hope for end to U.S.-China trade dispute

* Safe havens fall after China confirms talks

* Safran , Dassault Aviation among top European gainers

* Sterling loses some gains on election worries

* World FX rates in 2019: http://tmsnrt.rs/2egbfVh

By Tom Arnold

LONDON, Sept 5 (Reuters) - European shares rose to fresh

one-month highs and safe-haven assets such as gold and the yen

fell after news of U.S.-China talks set for early October raised

hopes of a de-escalation in their trade war before it further

damages the world economy.

The pan-European STOXX 600 index .STOXX rose 0.63% to

touch its highest level since Aug. 1. France's CAC 40 index

.FCHI jumped 0.79% to hit a more than one-month high,

outperforming major European bourses, aided by a 8% rise in

shares of engine maker Safran SAF.PA after the company upped

its full-year profit forecasts.

The rally followed gains in Asia, with MSCI's broadest index

of Asia-Pacific shares outside Japan .MIAPJ0000PUS gaining as

much as 1.08% to reach its highest since Aug. 2.

U.S. stock futures ESc1 reversed early losses and rose

0.5%.

The Chinese yuan jumped versus the dollar in offshore trade,

while safe-haven assets such as gold, the Swiss franc, and the

yen fell.

China's Commerce Ministry said on Thursday its trade team

would consult with their U.S. counterparts in mid-September in

preparation for negotiations in early October, hinting at

progress in reducing trade friction. Both sides agreed to take actual actions to create

favourable conditions, the ministry added, without giving more

details.

"The general market tone is driven by the announcement of

the meeting of high-ranking officials between China and the

U.S," said Francois Savary, chief investment officer at Swiss

wealth manager Prime Partners.

"But this is not a sustained move into risk-on mode as

nothing concrete has come out of it yet and investors need to

wait to see whether the meeting will happen and what the results

from it will be."

BREXIT NEWS ALSO A POSITIVE

Adding to the upbeat mood, a parliamentary vote in Britain

put the brakes on the nation's no-deal exit from the European

Union, Hong Kong withdrew a contentious extradition bill that

sparked recent protests in the Chinese-ruled city and weeks of

political turmoil in Italy appeared to ease.

"Since yesterday, there has been limited downside in markets

because of what happened in Hong Kong, but now the U.S.-China

talks are the story," said Masayuki Kichikawa, chief macro

strategist at Sumitomo Mitsui Asset Management Co in Tokyo.

"It's the same about Brexit, which means less downside

risk."

Any sign that Washington and Beijing are closer to scaling

back or resolving their trade dispute would lift a significant

burden from the global economy, but many analysts believe the

two sides are dug in for a longer and costlier battle.

Weighing on sentiment was data that showed German industrial

orders fell more than expected in July on poor demand from

abroad, indicating manufacturers in Europe's biggest economy

continue to struggle in the third quarter. In European stocks, Dassault Aviation AVMD.PA joined

Safran in a sharp rise thanks to upbeat earnings updates.

Dassault rose 9%. News of a $5 billion share buyback sent

Equinor EQNR.OL up 5.8%.

UK bank CYBG CYBGC.L slumped 19% after saying it expected

to increase its provision for legacy payment protection

insurance by to 450 million pounds ($552 million).

In currency markets, the British pound lost some of its

overnight gains on concern that an election is still pending,

although Britain might have averted leaving the European Union

next month without a transition deal. Lawmakers are hoping to pass a bill that seeks to stop

Britain from leaving the European Union on Oct. 31 with no

agreement. Against the dollar GBP=D3 , the pound fell 0.3% to $1.2211,

after jumping 1.4% on Wednesday.

Against the offshore yuan CNH=D3 , the dollar fell as much

as 0.2% to 7.1340 yuan.

Spot gold XAU= fell 0.6% to $1542.38 per ounce.

The dollar rose 0.17% to 106.60 yen JPY=EBS and gained 0.3% to

0.9839 Swiss franc CHF=EBS .

The 10-year German Bund DE10YT=RR rose more than 1 basis

point to -0.66%, away from the record lows of -0.743% touched on

Tuesday.

Seizing on recent doubts about whether a European Central

Bank stimulus package next week can match expectations, other

top-rated euro zone yields also increased FR10YT=RR ,

NL10YT=RR , although the rises were small.

Having spiralled lower in the past week after agreement was

reached on a new coalition government in Rome, Italian yields

steadied near their record lows.

The 10-year Italian yield was unchanged at 0.826%

IT10YT=RR , close to the record low of 0.803%. The IT5YT=RR

and 30-year IT30YT=RR Italian bond yields were also little

moved in early trade. U.S. West Texas Intermediate crude CLc1 was 0.6% down at

$55.91 per barrel.

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