- Relief over new US 10% trade salvo
- More tariffs could still come
- European mergers help upswing
European shares have followed an upsurge by their Asian peers following the imposition of 10% tariffs on additional Chinese imports to the United States worth $200bn.
In the wake of the latest moves in the ongoing trade war between the US and China, trading centers in the euro zone saw increases. Germany’s DAX, home to major carmakers and other exporters judged to be at risk from any escalation in the trade wars, was up by 0.5%. In Paris, the CAC 40 saw an increase of 0.6%. Although it opened flat, the pan-European STOXX 600 later gained 0.1%.
The announcement of the new tariffs had been expected for some time, and Pictet Senior US Economist Thomas Costerg said that investors would most likely be prepared for the news. He also said that some might take the view that some restraint had been shown by Washington as the new levies could have been higher.
“Ten percent could actually come as a relief,” Costerg explained. He added that a figure of this size would be “bad but manageable.”
On Tuesday, Markets.com Chief Market Analyst Neil Wilson said: “Exemptions have turned this into something of a sell the rumor, buy the fact type scenario for investors.”
However, President Donald Trump warned that he was still willing to introduce more levies covering a wider range of Chinese imports if Beijing took its own retaliatory measures. As China’s exports to the US far outweigh those going in the other direction, Beijing may have to take direct action against companies in order to match pressure from Washington.
In any case, it wasn’t just the reaction to the latest move in the US/China trade war saga that caused upward movement in the markets; new mergers and acquisitions also played a role.
Norway’s Schibsted ASA announced that it would spin off its international online classifieds and gained 11.1% as a result. Denmark’s Pandora recorded a 9% hike in large volumes after a report emerged that private equity funds were thinking about making an offer for the company.
Elsewhere in Europe, Swiss chemical group Clariant saw an increase of 6.5% after news broke of a merger of its high-performance materials business with new anchor shareholder Saudi Basic Industries Corporation. The focus of the new partnership will be higher-value specialty chemicals.
It wasn’t good news for everyone as Europe’s biggest pure online fashion retailer, Zalando, saw the worst performance with its share price dropping 14%; they blamed the unusually hot summer. Kinnevik, which holds a roughly 31% stake in the company and is its biggest shareholder, fell 7%.