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Europe close: Stocks bounce back as analysts sound more confident note

By Alexander Bueso

Date: Monday 11 Mar 2019

Europe close: Stocks bounce back as analysts sound more confident note

(Sharecast News) - Stocks on the Continent put in modest gains on Monday, bouncing back from a modest pull-back over the preceding week, helped perhaps by what some economists said were 'green shoots' in the latest economic data.
That was despite reports that US and Chinese negotiators might not be seeing eye-to-eye yet when it came to the enforcement mechanisms that should be put in place for any trade deal and Beijing's currency policy.

Yet while caution continued to prevail among many traders, analysts at various top firms weighed in with more positive views.

One of those was JP Morgan's Mislav Matejka, who told clients: "We believe though that one should be using market weakness as an opportunity to add further, as, in our view, the investor positioning is still light and we think that the ytd rebound will have legs when earnings and PMIs turn higher into 2H."

Morgan Stanley also struck a 'bullish' note, saying: "After a tough 12 months, we think European macro news-flow looks set to improve as idiosyncratic factors fade and China starts to recover. This should be positive for European equities and [the euro]. We remain 'underweight' European government bonds and add China exposure in [euro-denominated investment grade] via Autos and Industrials."

By the end of trading, the benchmark Stoxx 600 was 0.78% higher at 373.47, alongside a 0.75% rise on the Dax to 11,543.48, while the FTSE Mibtel was up by 0.75% to 20,638.22.

Meanwhile, front month Brent crude oil futures were adding 1.2% to $66.52 a barrel on the ICE on the back of reports that Saudi was set to keep its output will below 10.0m barrels a day in April.

Oxford Economics sees 'green shoots' in German IP data

A reading on German industrial production was the main release on Monday.

According to the Federal Office of Statistics, industrial output dropped at a 0.8% month-on-month pace in January, falling well short of forecasts calling for a rise of 0.4%, and by 1.2% excluding construction and energy.

But upwards revisions to the prior month's data made up for that shortfall entirely.

Furthermore, excluding autos, production grew by a "solid" 0.5% on the month "as large sectors such as chemicals and metal goods saw sustained rises as they begin to partially make up for the weakness at the end of last year," Oliver Rakau at Oxford Economics pointed out.

Similarly, separate data showed the country's seasonally-adjusted trade surplus shrank from €19.9bn for December to €18.5bn in January, but the year-on-year rate of growth in exports picked up from 1.4% for December to 1.8% in January, he noted.

"A closer look reveals that even German industry is seeing some green shoots emerging. We stick to our Q1 GDP forecast of 0.5% q/q," he said.

Over in France meantime, the central bank's latest survey of activity pointed to an acceleration in February within manufacturing, although Banque de France trimmed its forecast for first quarter GDP growth by a tenth of a percentage point to a 0.3% quarter-on-quarter clip.

To take note of, investors were also waiting on a key report on US retail sales covering the month of January.

And in China ...

Regarding the US-China trade talks, on Saturday, Chinese vice commerce minister, Wang Shouwen, said an enforcement mechanism for any trade deal must be "two way, fair and equal".

Also at the weekend, Chinese central bank Governor, Yi Gang, said the need to abide by previous commitments not to engage in competitive devaluations had been discussed by both side, but he made no reference to any unilateral pledge by Beijing not to do so.



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