FILE PHOTO – The German share prize index DAX board is reflected in a glass facade in Frankfurt, Germany, January 15, 2019. REUTERS/Kai Pfaffenbach
August 7, 2019
By Susan Mathew and Shreyashi Sanyal
(Reuters) – European shares rose on Wednesday, breaking a three-day losing streak on euphoria over a multi-billion dollar German chemical deal but gave up some gains after Wall Street opened sharply lower on recession worries.
The pan-European STOXX 600 index <.STOXX> closed 0.2% higher, after having gained as much as 1% during the session when Bayer <BAYGn.DE> and Lanxess’ <LXSG.DE> deal to sell chemical park operator Currenta for $3.9 billion had lifted stocks.
Bayer’s <BAYGn.DE> 6% jump was the biggest boost to the main index and helped Germany’s DAX <.GDAXI> shrug off week industrial output data.
However, all major country indexes in Europe cut some gains, with Italian <.FTMIB> and Swiss <.SSMI> stocks turning negative, after U.S. stocks plunged as investors were spooked by the latest signals from bond markets that pointed to heightened risk of a recession. [.N]
Investors have been scooping up U.S. government debt since last week on bets the Federal Reserve would need to cut interest rates more than it has signaled so far, in a bid to combat risks from the escalating trade war between China and the United States. [US/]
“With such a bad U.S. open and with the dominant story in the last few days being about U.S.-China trade war, the European markets have been looking at the U.S. for cues,” said Spreadex analyst Connor Campbell.
In Europe, German long-dated bond yields tumbled to new record lows as a large rate cut from New Zealand and weak German data gave further impetus to a relentless rally in bond markets. [GVD/EUR]
“We are potentially in the eye of the storm at the moment and investors are wary that another price tanking headline could be coming at any moment.”
A sell-off in stocks since last week when U.S. President Donald Trump threatened more tariffs on Chinese goods is reminiscent of a sharp fall in May when a sudden breakdown in trade talks had seen European markets post their worst month in more than three years.
Europe’s main index has lost about 5% since last Friday. In May, it lost 5.7%.
A continued slide in iron ore and oil prices weighed on material and energy stocks <.SXEP>, with Glencore Plc’s <GLEN.L> 0.9% slip on a 32% drop in first-half core profit adding to the material sector’s 1% fall.
Novartis <NOVN.S> was the biggest weight on STOXX 600 after the Swiss drugmaker said it knew about discrepancies in data submitted to regulators as it sought approval of its more than $2 million gene therapy Zolgensma.
In Italy, biggest lender UniCredit <CRDI.MI> lagged after it cut its revenue target for 2019, but a sharp rise in net profit at Italian lender Banco BPM <BAMI.MI> saw its shares post their best day in over a month.
(Reporting by Agamoni Ghosh, Shreyashi Sanyal and Susan Mathew in Bengaluru; editing by Patrick Graham and Stephen Powell)
