EUROPEAN EXCHANGES RECORD ONE OF THEIR BEST PERFORMANCES OF THE YEAR

PARIS (Reuters) – European stock markets recorded one of their best performances of the year on Friday, taking advantage of the two-fold hope of a trade-off between the United States and China and a rapprochement London and Brussels on the exit of the United Kingdom from the European Union.

In Paris, the CAC 40 finished on a gain of 1.73% (96.43 points) to 5665.48 points, its largest percentage increase on a session since August 8.

In London, the FTSE 100, hampered by the appreciation of the pound sterling, which disadvantage exporters, rose by 0.84% ​​while in Frankfurt, the Dax, very exposed to the theme of international trade, shows a leap of 2.86%.

The EuroStoxx 50 index took 2.17%, the FTSEurofirst 300 1.89% and the Stoxx 600 2.31%, its best session since January 4th.

In Washington, Donald Trump will receive at 18:45 GMT at the White House Chinese Vice Premier Liu He, leader of the Chinese delegation who will attend two days of high-level discussions on trade.

While the United States still threaten, officially, to raise next Tuesday the tariff on 250 billion dollars of Chinese products, the US president has welcomed on Twitter exchanges "warm".

Investors, if they do not really believe in the imminence of a global settlement of the commercial dispute that weighs on the markets for a year and a half, want to believe in a beginning of rapprochement between the first two world economies.

"We have seen for several months that companies suffer from the uncertainty around international trade and markets are on the lookout for any index likely to remove this uncertainty," summarizes Scott Brown, Chief Economist Raymond James.

On the Brexit front, the chief negotiator of the European Union, Michel Barnier, has begun a new round of negotiations with London, less than a week from the European summit of 17 and 18 October, considered crucial to avoid a UK exit from the EU without negotiated agreement.

The discussions of recent days, especially between the British and Irish governments, have changed the judgment of many investors on the outcome of the negotiations: Morgan Stanley now estimates at 55% the probability of an agreement, against 35% before the latest developments , JPMorgan at 50% against 5%.

Over the week, the Stoxx 600 gained 1.99% and the Paris CAC 40 3.23%, its best weekly performance since mid-March.

VALUES

The general trend favorable to equities benefited on the one hand the European sectors most sensitive to fluctuations in trade tensions, as the high technologies, whose Stoxx index took 4.72%, raw materials (+ 4.68% ) and the automobile (+ 3.46%).

But the best sectoral performance of the day is for the banking sector, whose benchmark jumped 4.92%.

British and Irish banks posted even more spectacular increases, for example 11.46% for Royal Bank of Scotland or 11.23% for Bank of Ireland.

In Paris, Renault took 5.12% after the confirmation of the dismissal of its managing director, Thierry Bolloré.

On the downside, Publicis fell 14.51% and hit a seven-year low after a warning about its results. In Frankfurt, Hugo Boss yielded 13.45%, the market sanctioning the downward revision of the sales forecast.

A WALL STREET

At the time of closing in Europe, Wall Street also saw a sharp rise, the Dow Jones winning 1.59%, Standard & Poor's 500 1.53% and Nasdaq Composite 1.97%.

Apple (+ 1.90%) set a new record at 235.16 dollars.

INDICATORS OF THE DAY

In the United States, household sentiment improved unexpectedly in October, according to preliminary results from the University of Michigan's monthly survey: its confidence index rose to 96.0 from 93.2 in September; economists and analysts polled by Reuters on average forecast a figure down to 92.0.

In Europe, German inflation under European HICP standards was confirmed at 0.9% over one year in September.

EXCHANGE

Renewed appetite for risky assets detracts from the dollar, which yields 0.44% against a basket of reference currencies, the lowest since September 20.

On the other hand, currencies sensitive to trade tensions are on the rise, like the Australian dollar, which hit a two-week high against the US dollar, and the Chinese yuan, which has been at its highest level in three weeks.

But the big winner today is the pound, which appreciates nearly 2% against the dollar and 1.6% against the euro.

The single European currency gained 0.32% against the dollar at 1.1039 after a three-week peak at 1.1062.

RATE

Rising equities boost bond yields by diverting investors from debt markets.

That of the ten-year German Bund, benchmark for the euro area, took nearly five basis points over the day to finish at -0.442% after a peak at -0.427%, its highest level since August 1.

In the US market, the ten-year yield jumped more than nine points to 1.7534%.

But the most spectacular rise is for the ten-year British since it exceeds 12 points, to 0.707%. On the other hand, its Irish equivalent has dropped nearly four points, with the hope of an agreement on Brexit favoring purchases of securities issued by Dublin.

OIL

The oil market has risen the most since mid-September after Iran's official media reported a missile attack on an oil tanker from the Iranian National Oil Company (NIOC) in the Red Sea.

Brent gained 1.68% to 60.09 dollars a barrel and US light crude (West Texas Intermediate, WTI) 1.44% to 54.32 dollars.

(Marc Angrand, edited by Jean-Michel Belot)

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