European Equity Benchmarks Close Higher; EU Approves UK Withdrawal Agreement
The broad-based major European indices closed sharply higher in Monday trading as rising automotive and energy stocks helped boost the markets.
In economic news, the European Council has formally endorsed the agreement on the withdrawal of the UK from the European Union. The agreement will come into force on Mar. 30.
“The European Council restated the Union’s determination to have as close as possible a partnership with the United Kingdom in the future,” said European Council President Donald Tusk. “Ahead of us is the difficult process of ratification as well as further negotiations. But regardless of how it will all end, one thing is certain: we will remain friends until the end of days, and one day longer.”
Meanwhile, business activity in the euro area grew at its weakest rate in nearly four years during November, according to the latest IHS Markit Eurozone Composite PMI data. IHS said slower order book growth and falling exports were accompanied by deteriorating optimism about the outlook, as well as rising costs and prices. According to the flash reading, which is based on 85% of usual monthly replies, the PMI fell to 52.4 in November from 53.1 in October, which was the lowest reading since December 2014.
The firm said the weaker rise in business activity was fuelled by a slowdown in new business inflows to its lowest level since early 2015. The slowdown in business activity growth was most pronounced in manufacturing, where output rose only marginally, said IHS. The rise in factory output was the weakest since the recovery in production began in July 2013, and production growth came to a near-standstill in response to second straight monthly drop in factory orders and exports.
“The cooling of Eurozone business growth to a four-year low adds to signs that the economy faces a disappointing end of the year,” said Chris Williamson, IHS Markit’s chief business economist. “Manufacturing remains the main area of weakness, linked in part to having been hit hard once again by deteriorating exports. The slowdown is also being temporarily exacerbated by persistent disappointing car sales.”
In Germany, the Federal Statistical Office (Destatis) reported that price-adjusted new orders in the main construction industry in September increased a seasonally and working-day adjusted 3.6% from August. In building construction and civil and underground engineering, in establishments of enterprises with 20 or more persons, new orders increased by 11.4% in nominal terms compared with the corresponding month of the previous year.
In France, the Institute for Statistics and Economic Studies (INSEE) said that the business climate in November was stable and remains at a relatively high level. The composite indicator, compiled from the answers of business managers in the main sectors stands at 104, unchanged from October, but still above its long-term mean of 100.
And in Italy, exports to non-EU countries increased by 11.6% and imports increased by 24.9% in October compared with the same month last year, according to the Italian National Institute of Statistics (Istat). The trade balance showed a surplus of EUR3.045 billion compared with a EUR4.279 billion euro surplus in the same month of 2017. At Exports increased by 5.3% and imports decreased by 0.1% compared with September. Over the past three months, seasonally-adjusted data showed a 1.0% increase in outgoing flows, and a 5.4% increase in incoming flows in comparison with the previous three months.
In equities, energy services firm John Wood Group, and telecommunications operator Vodafone led the FTSE higher in London, rising 7.6% and 6.3% respectively, followed by mining company Fresnillo, and insurance company Prudential which climbed 4.2% and 3.7%. Automaker Rolls-Royce gained 3.4%, while communications group WPP, private equity firm 3i Group, and electric services company Centrica each closed 3.1% higher.
In Frankfurt, adhesives manufacturer Covestro, and Deutsche Bank led the DAX sharply higher, climbing 5.1% and 4.8% respectively, followed by internet company Wirecard, and Allianz, which were up 2.9% and 2.8%. Tire maker Continental increased 2.7%, while automaker Daimler, and semiconductor company Infineon each closed 2.5% higher. Postal services provider Deutsche Post rose 2.4%, while electricity and natural gas provider RWE, pharmaceutical firm Bayer, and airline operator Lufthansa each closed 2.3% higher.
In Paris, oilfield services firm TechnipFMC led the CAC higher, gaining 5.2%, followed by construction materials supplier Saint Gobain, and IT firm Atos, which climbed 4.1% and 3.9% respectively. Bank Credit Agricole was up 3.7% while tire maker Michelin, and telecommunications, media, and construction conglomerate Bouyges were up 3.2% and 3.1%. Natural gas distributor Engie increased 2.9%, while semiconductor company STMicroelectronics, and automaker Renault rose 2.8% and 2.7% respectively.
The FTSE rose 1.20%, the DAX climbed 1.45%, and the CAC-40 gained 0.97%.
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