Compromise in Germany helps European equities to leave

by Patrick Vignal

PARIS (Reuters) – The main European stock markets begin a rebound on Tuesday after the agreement found in the government coalition in Germany on the issue of migration, but caution remains the risk of trade war, as in reflects the continued decline of the Chinese markets and the yuan.

In Paris, the CAC 40 index 0.53% takes at 5.304,7 points around 08:10 GMT. In Frankfurt, the Dax gained 0.65% and in London, the FTSE advance of 0.28%.

The EuroStoxx 50 index of the euro zone rose by 0.6%, the FTSEurofirst 300 by 0.41% and the Stoxx 600 by 0.43%.

Angela Merkel's Christian Democratic Union (CDU) and its Bavarian ally, the Christian Social Union (CSU), reached Monday night to overcome the differences over immigration that threatened the government coalition.

After hours of talks between the two conservative groups, Horst Seehofer, Minister of the Interior and leader of the CSU, gave up his threats of resignation.

The CDU now hopes that the SPD will agree to join this compromise, which would end up saving the ruling coalition.

This news allows the euro to resume some colors, around 1.1660 dollar, after falling to 1.1589 the day before. The yield on the ten-year German Bund is also up 0.326%.

On Monday, the German Interior Minister's threat of resignation was added to lingering fears over international trade tensions to stall the start of the second half of the year on European stock markets.

TECHNOLOGY IN SUPPORT

Tuesday's trend in early trading is supported by trade-sensitive sectors, starting with technology, with the Stoxx index gaining 0.54% with a gain of 2.08% in Paris for STMicroelectronics , the largest increase in the CAC 40.

Against the trend, Trigano (-11.66%) closed the march of the SBF 120 after announcing Monday sales at constant scope and exchange rates slightly down in the third quarter.

The biggest drop in the Stoxx 600 is for the Dutch BE Semiconductor, which is down 6.90% after lowering its revenue forecast in the second quarter of its fiscal year due to the cancellation of several orders.

If Wall Street managed to finish Monday in the green thanks to the good performance of technology stocks – the S & P 500 gained 0.31% – stock markets in Asia continue to suffer fears of worsening trade disputes between the United States and their partners.

Chinese stock markets are at the forefront: the composite index of the Shanghai Stock Exchange fell to 1.9% in session before returning to positive territory at the end of the session (+ 0.39%) and the Hong Kong Stock Exchange, which was closed Monday, yielded 1.41%.

"It is not yet certain that a trade conflict can derail the global economy as a whole, but it is already clear that this will penalize Chinese companies," said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank. .

"This is why we are seeing sales movements on the Chinese yuan and Chinese equities, I think that will continue until at least July 6".

YUAN SUFFERS FACING THE DOLLAR

At this time, the United States must introduce tariffs of $ 34 billion on a list of Chinese products, which could initiate a cycle of reprisals at the risk of causing a real trade war between the first two powers economic.

The yuan rose above 6.7 per dollar for the first time since August 9, 2017 before rising again amid speculation about a possible intervention of the Chinese central bank.

Governor of the People's Bank of China (BPC), Yi Gang, said on Tuesday that China will continue to pursue a prudent and neutral monetary policy to keep the fundamentally stable yuan at a reasonable level.

The Chinese currency has lost more than 4% against the dollar since mid-June.

Elsewhere in Asia, the Tokyo Stock Exchange fell by 0.12% and the MSCI index of Asia Pacific stocks (excluding Japan) sold 0.17%.

The ASX 200 index of major Australian stocks gained 0.52% after the status quo on its rates from the Central Bank of Australia (RBA), which highlighted the low inflation in the country and the risk posed by US trade policy to the global economy.

On the oil market, crude oil prices are rising, driven by production disruptions in Libya due to the closure of some wells and ports.

The Wall Street futures report a slightly higher opening for a cut shortened. The New York Stock Exchange will close its doors at 19:00 GMT and will pause Wednesday due to National Day (Independence Day).

(Edited by Blandine Hénault)