European shares rose on Monday, with a higher open on Wall Street bolstering gains later in the session, while exporters were helped by a decline in the value of the euro. With Wall Street driven by a rally in iPhone maker Apple, investors seemed to shrug off fresh concerns about US-China trade negotiations and looming US tariffs on European imports.
The benchmark European index closed 0.4% higher and clocked its best monthly gain since June. It rose nearly 2% in the third quarter to bring year-to-date gains to around 16%. "Stocks are largely positive as we approach the close as traders are a little less fearful about the US-China trade situation," said David Madden, a market analyst at CMC Markets UK, shortly before trading ended for the day.
Euro-zone blue-chips rose 0.7% on the day as companies that earn their revenue in dollars were boosted by a fall in the euro on concerns about euro zone growth. Germany's leading economic institutes have revised down their growth forecast for Europe's biggest economy for this year, sources told Reuters on Monday, the same day data showed German annual inflation unexpectedly slowed for the third consecutive month in September.
But Carsten Brzeski, chief economist at ING Germany said lower inflation indicated that "the feared growing contagion from the manufacturing meltdown to the rest of the German economy is not (yet) materialising". "Even better, private consumption should benefit from lower inflation rates in the coming months," he added. Germany's DAX index rose for a third session, adding 0.4%.
J.P Morgan raised its rating on euro zone equities to "overweight", saying the bloc's battered stocks have been under owned and predicting an opportunity for them to bounce back. Commodity-linked stocks and oil majors closed lower, weighing on London stocks, while all other major sectors in Europe ended higher.
There were, however, signs of underlying worries with defensive sectors such as utilities, real estate and food and beverage among the top gainers. A report on Friday said the United States might limit Chinese company listings on its stock exchanges, fueling more US-China trade angst ahead of critical negotiations next week.
However, White House trade adviser Peter Navarro on Monday dismissed reports that the Trump administration was considering delisting Chinese companies from US stock exchanges as "fake news." Equity markets rallied in September on monetary easing from the European Central Bank and the US Federal Reserve, and hopes of a resolution to the economically damaging trade war.
But gains have slowed substantially from the 12% increase posted by European shares in the first quarter of the year as concerns linger about the health of the euro zone economy, as well as trade. All eyes are now on an announcement by the World Trade Organization (WTO), which is expected to grant the United States a record award allowing it to hit European imports with billions of dollars of tariffs in a long-running aircraft subsidy dispute. GlaxoSmithKline gained 1.1% after its maintenance therapy for a form of ovarian cancer reduced the risk of disease progression or death.