European stocks posted strong gains across the board on Tuesday, as concerns over the inconclusive Italian election result and fears of a global trade war ebbed for now.
What are markets doing?
The Stoxx Europe 600 index
gained 0.7% to 373.56, building on a 1% gain from Monday,
Italy’s FTSE MIB Index
rallied 1.1% to 22,053.68, rebounding from a 0.4% loss on Monday that came after the country’s general election produced no outright majority for any party, but showed a big shift toward populist, euroskeptic parties.
Germany’s DAX 30 index
gained 1.1% to 12,226.61 on Tuesday, while France’s CAC 40 index
added 0.7% to 5,201.16. The U.K.’s FTSE 100 index
What is driving the market?
The broad-based rally came as investors put fears over a global trade war behind them for now. Those concerns were sparked last week when U.S. President Donald Trump’s said he would impose tariffs on steel and aluminum imports and that “trade wars are good, and easy to win.”
But on Monday, Republican leaders, including House Speaker Paul Ryan, warned that the tariffs could jeopardize U.S. economic growth and began lobbying for the president to reconsider the move.
“We are extremely worried about the consequences of a trade war and are urging the White House to not advance with this plan,” Ryan spokeswoman AshLee Strong said.
The European Union has threatened to slap a 25% tariff on some U.S. goods, if the tariffs come into effect, according to a Bloomberg report.
European stocks were also shrugging off concerns over Italy’s political landscape. The election on Sunday showed around half of the voters supported the anti-establishment 5 Star Movement and Northern League, seen as reviving the populist threat in Europe. However, the two parties are unlikely to team up in a coalition, and analysts expect a protracted period of political horse trading for a new government to emerge.
Analysts at UBS said a government is unlikely to be appointed before April and that “volatility may increase over the short term.”
Which stocks are in focus?
Shares of Thales SA
rallied 6% after the aerospace-and-defense company said net profit fell 13% on 2017, but that it had exceeded all of its financial objectives for the year.
Telecom Italia SpA
gained 4.8% after Bloomberg reported that activist hedge fund Elliott Management is building a stake in the Italian company.
Shares of Smurfit Kappa Group PLC
soared 18% after the packaging company rebuffed an offer proposal from International Paper Co.IP, +0.80%
Shares of Tesco PLC
put on 3% and Wm. Morrison Supermarkets PLC
added 1.4%. The moves came after a survey from Kantar Worldpanel showed the two supermarkets chains were the fastest-growing grocers in the U.K. over the last 12 weeks.
slumped 9.5% after the power supplier said pretax profit declined in 2017.
Just Eat PLC
slumped 9.4% after the takeaway company swung to a pretax loss in 2017. It announced extra investment to boost its delivery services.
Ashtead Group PLC
lost 4.3%. The industrial equipment rental company posted an increase in third-quarter profit, but also said finance director Suzanne Wood is to step down from her role on March 31.
What are strategists saying?
“Stock markets are higher this morning as it seems President Trump is willing to hold off on his plans to introduce tariffs on imported steel and aluminum,” said David Madden, market analyst at CMC Markets UK, in a note.
“With the U.S. president keen to put ‘America first’, it now appears that the talk of tariffs was a ploy to improving his position in relation to altering the North American Free Trade Agreement (NAFTA), to the advantage of the U.S. As the prospect of a trade war has cooled, traders are now feeling more confident about snapping up equities,” he added.