Europe open: Stocks rise as trade worries recede; autos rally
European stocks rose in early trade on Thursday as investors brushed aside concerns about trade tensions between the US and China.
At 1040 BST, the benchmark Stoxx Europe 600 index was up 0.4% to 381.50, while Germany's DAX and France's CAC 40 were 0.6% higher at 12,253.59 and 5,423.72, respectively.
Hussein Sayed, chief market strategist at FXTM, said equity markets don't seem to be concerned over the latest phase of the US-China trade war.
"The 10% tariffs imposed by the US on $200bn worth of Chinese goods seemed to be a relief rather than a catastrophe given that markets were bracing for a 25% figure. Similarly, the Chinese response was a softer hit than anticipated after announcing that the nation won’t engage in currency devaluation.
"Although China cannot go toe-to-toe with the U.S. in a retaliatory tit-for-tat tariff war, they still have options to support their economy and hit back at the U.S. with non-tariffs weapons. China may simply put its deleveraging efforts on hold and begin a new round of fiscal and monetary stimulus to offset the damage created by trade. A reduction in corporate tax rates on manufacturing and other industries along with keeping interest rates low and a further cut in reserve requirement ratio to support credit growth will keep the economy well supported for the foreseeable future."
Auto stocks racked up healthy gains, with the Stoxx 600 sub-index for autos and parts up 1.3% to 556.22 after Kepler upgraded the sector to 'neutral' from 'underweight', saying that valuations have reached historically low levels, pricing in a lot of bad news already.
Kepler said its analysts envisage a series of late-year bounces within Europe’s depressed value universe in segments that have been largely abandoned by investors. "September and October demand data should be key tests for such a potential bounce," it said.
Belgian telecoms group Proximus was on the front foot after an upgrade to 'buy' from Citi, while Rio Tinto was higher after the miner outlined plans to return around $3.2bn to shareholders through a share buyback programme following the disposal of its coal assets.
Drinks giant Diageo gained after saying that its financial year has "started well", though it has been buffeted in recent weeks by increased emerging market foreign exchange volatility.
Elsewhere, Nestle was in focus after saying it is exploring strategic options for its skin health unit.