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Europe markets inch higher on EU-China trade optimism

A darkening picture for global trade didn’t put a damper on markets Read More...

European markets cautiously inched higher as investors weighed a cut to the International Monetary Fund’s global growth forecast against a breakthrough in China-European Union trade talks.

Investors were also absorbing comments from European Central Bank President Mario Draghi, after the central bank left key interest rates unchanged.

How did markets perform?

The Stoxx 600 SXXP, +0.37%  rose 0.3% to 386.71, after falling 0.5% Tuesday.

The U.K.’s FTSE 100 UKX, -0.03%  was flat at 7,422.9, steadying after Tuesday’s drop of 0.4%.

The pound GBPUSD, +0.1149%  climbed 0.2% to $1.3079 following Tuesday’s flat close.

Germany’s DAX DAX, +0.60% DAX, -0.65%  was the biggest regional gainer at 11,919.3, up 0.5%. On Tuesday it fell 0.9%.

Italy’s FTSE MIB I945, +0.28%  nearly recovered Tuesday’s loss, moving up 0.2% to 21,725. It had slumped 0.5% the previous day.

In France, the CAC 40 PX1, +0.43%  was up 0.4% to 5,457.52 after falling 0.4% Tuesday.

The euro EURUSD, -0.2398%  was flat at $1.1273, following Tuesday’s close up 0.1%.

What’s moving the markets?

The release of the IMF’s April World Economic Outlook report saw global growth for 2019 revised down 0.2 percentage points to 3.3%, reflecting trade tensions and anxieties over corporate debt levels. In addition to the expected focus on China and U.S.-China trade, the IMF singled out weakness in the euro area, specifically in Germany and Italy. “This is a delicate year for the global economy,” wrote IMF chief economist Gita Gopinath, adding that should the many downside risks materialize, “policy makers will need to adjust”.

While Brexit sucked the oxygen out of discussions around the EU, European Council President Donald Tusk was holding a news conference with European Commission President Jean-Claude Juncker and Chinese Prime Minister Li Keqiang to declare a successful summit on China-EU trade. The agreements included a declaration that China would move more quickly to join a World Trade Organization agreement on government subsidies, and both sides would work on intellectual property and sustainability issues.

The European Central Bank left key interest rates unchanged, and President Mario Draghi reiterated that risks for the region are to the downside. The ECB in March surprised investors by announcing it would implement a new round of targeted long-term refinancing operations, or TLTROs — low-interest, long-term loans to eurozone banks — in an effort to boost the economy and bring inflation up to its target of just below 2%. Draghi said details on that TLTRO plan will possibly come next moth.

Also in focus was the EU’s emergency Brexit summit, where leaders are expected to blunt the threat of a no-deal Brexit by offering the U.K. a further extension. The question is how much of one. Prime Minister Theresa May is pushing for a short extension to June 30, while Tusk and others on the European side are lobbying for a delay of up to a year. If the extension is longer, the U.K. will have to participate in European elections, which is bitterly opposed by May and the hard Brexiteers in her Conservative Party.

Which stocks are active?

U.K. supermarket chain Tesco PLC’s TSCO, +1.80%   full-year earnings met with the market’s approval Wednesday, with shares up 3%. Neil Wilson, chief market analyst for Markets.com, cited group sales climbing 11% as a positive and singled out the performance of Booker, the wholesaler Tesco took over in 2018. He said “whilst there were doubters about management focus, the acquisition of Booker has proved to be a real master stroke” by Tesco chief executive Dave Lewis.

German-listed, Australia based energy company OMV AG OMV, -0.17%  has fallen victim to the turmoil in Libya, reporting that it didn’t take any deliveries from its operations there in the first quarter. Libyan militia groups took control of Shahara, Libya’s largest oil field, in late 2018. With oil prices rising broadly, and the company reporting production had climbed from 437,000 barrels a day to 474,000, the markets were optimistic on OMV’s shares, which rose nearly 2% Wednesday.

Jefferies analysts cut its price target for the German arm of Spanish telecoms giant Telefónica Deutschland AG O2D, -3.52%  . Germany is in the midst of holding a mobile spectrum auction which is key to the ambitions of the various players regarding emerging 5G technology. Shares rose 0.4%.

Ryanair PLC RY4C, -0.36%  shares fell 0.8% following a downgrade by Goodbody, which rated the stock a hold, down from a buy, and cut its price target. Like other airlines, the discount carrier is affected by delays related to Boeing’s troubled 737 MAX model, which it had ordered for its fleet.

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