European shares rise on relief over Trump’s China response

(Reuters) – European shares rose on Monday on hopes of a post-coronavirus global recovery, with investors relieved that the U.S. response to China’s national security law in Hong Kong was not as bad as feared.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, May 25, 2020. REUTERS/Staff

The pan-European STOXX 600 index rose 0.6%, hovering near its strongest level since March 9, led by gains in banks .SX7P, miners .SXPP and travel & leisure stocks .SXTP.

U.S. President Donald Trump began the process of ending special treatment for Hong Kong to punish China, but did not mention actions that could undermine the U.S.-China Phase One trade deal.

“The markets are focused on the bigger global picture and a slightly calmer tone on the U.S.-China front,” said Keith Temperton, a trader at Tavira Securities.

“However, things are definitely in the pipeline regarding the Hong Kong situation. The more of this goes on, there will be a reaction and markets will be caught by surprise.”

Global markets kicked off June on a strong note, with the STOXX 600 recovering nearly 31% since March lows as hopes of COVID-19 vaccine, easing lockdowns and expectations of more stimulus helped improve risk appetite.

The European Central Bank will meet on Thursday and investors expect policymakers to ramp up the bond-buying program.

Meanwhile, business activity surveys showed Germany’s manufacturing sector continued to contract in May, even as a slump in factory activity in France and Spain eased.

Among individual stocks, Italy’s Mediobanca (MDBI.MI) jumped 9.4% after billionaire Leonardo Del Vecchio confirmed he had asked for green light from the European Central Bank to increase his stake in the company.

Spain’s MasMovil MAS.MC surged more than 21% as buyout funds KKR (KKR.N), Cinven and Providence mounted a friendly bid to pay up to 2.96 billion euros ($3.30 billion) for the telecom operator.

Primark-owner Associated British Foods (ABF.L) gained 6.4% as it announced it was working to re-open all its 153 stores in England on June 15.

UK fashion brand Ted Baker (TED.L) slumped 11.3% as it rolled out plans to raise 95 million pounds ($117.84 million) through a stock issue to help it ride out the challenges posed by the coronavirus.

Markets in Germany, Switzerland, Denmark and Norway are closed for Whit Monday holidays.

Reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur

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