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Stocks gain on US-China trade optimism and German economic data

Stocks gain

Stocks started higher, buoyed by trade optimism and favourable German economic data

Stocks on the Continent have started the session higher, buoyed by positive trade headlines and favourable economic data out of Germany.

On Friday morning, the US Secretary of the Treasury, Steve Mnuchin, said he and American Trade Representative, Robert Lighthizer, had “constructive” talks in China and that he looked forward to the next round of talks, scheduled for the following week, in Washington.

A fresh round of Sino-US talks is boosting Asian and European markets this morning, raising hopes that a resolution to the ongoing dispute and the removal of tariffs that are in place will go some way to slow down the gradual weakening of the two countries’ economies, said Fiona Cincotta, senior market analyst at City Index.

Nevertheless, traders were mindful that a vote in the UK Parliament scheduled for 1430 GMT might see Britain stumble out of the European Union, likely triggering volatility in sterling.

Analysts at ING believed the course of events in the UK over the next two weeks was “highly uncertain”, although in their opinion a softer form of Brexit remained the most likely scenario, albeit only narrowly, followed by a second referendum.

However, the odds of ‘no deal’ and a general election appear to have climbed, they said in a research note sent to clients.

Those same analysts at the Dutch broker put the odds of May’s deal passing at 10%, of a softer Brexit at 25%, of a ‘no deal’ Brexit also at 25% and of a general election at 15%.

As of 0914 GMT, the benchmark Stoxx 600 was adding 0.57% to 5,326.64, alongside a gain of 0.14% to 21,109.24 for the FTSE Mibtel and an advance of 0.31% to 11, 63.89 for the German Dax.

In parallel, the pound was dipping 0.11% to 1.1612 as investors bid their time ahead of the vote in the UK Parliament.

As an aside, in a research note sent to clients, economists at Bank of America-Merrill Lynch cautioned clients about the impact that a delay in reaching a US-China trade deal might have on the Asian giant’s economy.

Economic data out at the end of the week was mixed, although readings on German retail sales and unemployment pleased.

According to Spain’s national office of Statistics, the quarter-on-quarter rate of growth in the country’s GDP slowed from 0.7% over the three months to September to 0.6% in the fourth quarter.

In Germany on the other hand, the latest official data showed that retail sales jumped at a month-on-month pace of 0.9% in February, after a 2.8% surge in January and defying analysts’ forecasts for a drop of 1.0%.

The strong start to the year adds evidence to the idea that German consumers’ spending is now rebounding after a significant slowdown through most of last year, said Pantheon Macroeconomics’s Claus Vistesen.

Those figures came alongside data showing a drop in the German rate of unemployment from 5.0% for February to 4.9% in March, as expected.

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