European stocks edged higher on Friday as investors treaded cautiously ahead of a critical G20 meeting where the outcome of US-China trade talks would be closely monitored against the backdrop of a slowing global economy.
US President Donald Trump was yesterday set to hold a meeting with Chinese President Xi Jinping (習近平) and markets were nervous over whether the outcome of that meeting would produce progress in ending the year-long trade spat that has dented growth in global markets.
The pan-European STOXX 600 ended up 0.7 percent at 384.87 points, little changed from last week’s 384.76.
Germany’s trade-sensitive DAX on Friday outperformed other major indices, rising 1 percent on the strength of top lender Deutsche Bank AG. It was up 0.5 percent for the week.
“People don’t know what to think before the upcoming meeting, so we’re likely to see a lot of instability, uncertainty and a general lack of direction, which will be resolved only at the end of the weekend,” said Josh Mahoney, market analyst at IG in London.
“I’d err on the side of caution, we aren’t going to see a major breakthrough on trade, but maybe we will see plans for further discussions down the line and that in itself could give some sort of boost to markets to say it’s not necessarily over quite yet.”
Trump yesterday said he eased restrictions on Huawei Technologies Co (華為) as part of a trade truce with Beijing, removing an immediate threat looming over the global economy even as a lasting peace remains elusive.
He said Xi had promised to buy “tremendous” amounts of US agricultural products in exchange.
The uncertainty in markets caused by conflicting reports on trade in the week leading up to the G20 meet in Japan stalled a rally in stocks and set the main index on pace to post its first weekly loss this month.
Still, the STOXX 600 is up about 3.9 percent this month on expectations that major central banks would be more accommodative to counter the impact of the tariff dispute that helped the index recoup most of its steep losses last month.
Deutsche Bank rose 3.1 percent after it passed an annual health check by the US Federal Reserve, clearing a second rigorous hurdle at a critical time for the German lender in tests that measure banks’ ability to weather a major economic downturn.
“Deutsche Bank was one of the leading lights of European banking, and the idea now is that if we are seeing increased stability in the firm, there is potential for them to be pairing up with another bank, so it’s a value play right now,” Mahoney said.
Travel and leisure stocks surged 1 percent, the most among major European sectors, after shares of Madame Tussauds owner Merlin Entertainments PLC jumped 14 percent.
Merlin said it would be acquired by Lego A/S’ founding family and private equity firm Blackstone Group in a deal valuing the company and its debt at nearly ￡6 billion (US$7.6 billion).
Additional reporting by Bloomberg
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