European shares edge higher as miners and banks gain

European markets edged higher on Friday, lifted by financial and mining stocks, with uncertainty over a U.S.-China trade deal limiting gains fuelled by dovish signals from the Federal Reserve this week.

Fed Chair Jerome Powell confirmed the U.S. economy was still under threat from disappointing factory activity, tame inflation and a simmering trade war, and said the Fed stood ready to “act as appropriate.”

The pan-European STOXX 600 index up 0.2% by 0855 GMT, lifted by a 1.5% rise in basic resources stocks .SXPP as China iron ore logged its best week since around mid-June. Banks .SX7P rose 0.7%.

Meanwhile, data out of China showed that Beijing’s exports fell in June as the United States ramped up trade pressure, while imports shrank more than expected, pointing to further strains on the world’s second-largest economy.

“The export data was really weak, and it’s one signal that the trade war has started to bite Chinese exporters and that companies are starting to re-route their supply chains,” said Stefan Koopman, senior market economist at Rabobank in Utrecht, Netherlands.

“European markets are waiting for a cue on what is happening between the United States and China on trade.”

Regional markets have regained their footing after a huge sell-off in May due to an escalation in U.S.-China trade tensions on expectations of rate cuts by major central banks.

Friday’s moves will cap a tepid week and set the main index to post its first weekly loss in six weeks, in contrast to world stocks that are on course to end the week higher.

Putting a damper on trade deal hopes, U.S. President Donald Trump said on Thursday China was not living up to promises it made on buying agricultural products from American farmers.

Among stocks, Daimler (DAIGn.DE) slipped 0.8% after the luxury carmaker warned investors it expected to swing to a second-quarter loss before interest and taxes of 1.6 billion euros.

“It’s highly indicative on what is happening on trade over the last couple of months. We’ve seen carmakers have difficulty, with Chinese car sales dropping over the past 6 to 12 months,” said Rabobank’s Koopman.

Healthcare stocks .SXDP slipped as drugmakers resumed their slide after the White House said it was ditching a key plan to lower U.S. drug prices, raising the possibility of new measures focused on drugmakers.

Reuters

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell