European shares opened higher on Friday following news that the U.S. and China will hold trade talks next week.
The pan-European Stoxx 600 index rallied almost 1 percent, with all sectors and major bourses in positive territory.
Basic resources stocks — with their heavy exposure to China — were the top gainers in Europe after China’s commerce ministry said the U.S. and Chinese would hold vice-ministerial level negotiations over trade in Beijing on Jan. 7-8. German copper producer Aurubis was the top sectoral performer, up 3.27 percent.
Looking at individual stocks, shares in Bayer rose after a U.S. judge moved to limit evidence in a trial over allegations that Monsanto’s glyphosate-based weed killer Roundup causes cancer. The German pharmaceuticals firm bought U.S. agriculture giant Monsanto last year for $63 billion. Shares of Bayer were up 2.57 percent.
On the other end, Sainsbury’s slumped close to the bottom of the Stoxx 600 after Jefferies, HSBC and Bernstein cut their price targets for the stock. Shares sank over 1 percent.
Investors are monitoring trade developments between Washington and Beijing for any clues as to how their trade dispute will reach a resolution. The two countries are trying to reach a breakthrough to resolve their differences over a 90-day tariffs truce.
Last year was marred by an intense sparring of tariffs between the world’s two largest economies, resulting in uncertainty for companies and nervousness for investors. Friday’s news buoyed Chinese equities, with the Shanghai composite climbing 1.81 percent higher, the Shenzhen Composite up 2.24 percent and Hong Kong’s Hang Seng index rising 1.3 percent.
Data showing China’s services sector extended a solid expansion in December also provide support for the market, amid fears of a slowdown in growth. The Caixin/Markit services purchasing managers’ index (PMI) rose to a six-month high of 53.9 in December, up November’s reading of 53.8. Chinese manufacturing PMI data earlier this week showed a contraction in factory activity for the first time in 19 months, news which had put investors on edge.
This week, Apple raised the alarm on China’s weakening economy, citing such weakness as a reason in part to lower its first-quarter revenue guidance. Chief Executive Tim Cook said in a letter to investors Wednesday that the firm saw an impact to the Chinese economy from “rising trade tensions with the United States.” He said disappointing iPhone revenue driven by poor sales in Greater China was a primary factor in Apple’s earnings warning.
News of the upcoming trade talks also gave U.S. futures a boost Friday, with the Dow expected to open 100 points higher and S&P 500 and Nasdaq futures climbing more than half a percent.
Investors stateside are closely watching domestic political developments. The House of Representatives on Thursday passed a bill that would end a partial government shutdown which has seen workers furloughed or working without pay. The funding package does not include money for President Donald Trump’s proposed border wall between the U.S. and Mexico, however, a key sticking point in the bid to end the shutdown.
Meanwhile, over in Europe, a survey released Friday showed that 57 percent of U.K. Prime Minister Theresa May’s Conservative Party members would rather withdraw from the European Union without a deal than stick with the government’s Brexit deal. The poll added to concerns that May will be unable to get her deal through parliament at a vote scheduled for the week beginning Jan. 14.
In corporate news, troubled Italian lender Banca Carige is exploring the use of a 320 million euro ($364.6 million) convertible bond to boost capital and avoid the use of taxpayers’ money, Fabio Innocenzi, formerly the bank’s chief executive, said Thursday in an interview with Class CNBC. Innocenzi was one of three temporary administrators appointed by the European Central Bank to take control of the lender earlier this week.
On the earnings front, British textile rental firm Johnson Service Group said Friday that it expected to report full-year results in line with market expectations. Shares climbed over 1 percent.
In terms of data, British house prices in December fell 0.7 percent from the previous month, the biggest monthly fall since July 2012, according to Nationwide. Euro zone composite PMI and services PMI for December are due at 4 a.m. ET, and the euro zone December inflation rate is due at 5 a.m. ET.
Elsewhere, traders are looking ahead to a joint discussion with Federal Reserve Chairman Jerome Powell and former Fed chiefs Janet Yellen and Ben Bernanke, due to take place at 10:15 a.m. ET. The U.S. central bank raised interest rates four times in 2018, however expectations for the Fed to pause rate rises — or even cut rates — have increased amid fears around slowing global economic growth.
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