European shares recover after Mnuchin calls U.S.-China trade talks 'productive'

LONDON (Reuters) – Signs of progress from U.S.-China trade talks in Beijing helped European stocks reverse earlier losses on Friday, while auto shares continued to slide after figures showing an ongoing slump in European car sales.

The trade-sensitive German index, fell as much as 0.7 percent in early deals, but recovered to trade flat on the day after U.S. Treasury Secretary Steven Mnuchin said U.S. and Chinese trade negotiators had “productive meetings”.

The STOXX 600 rose to trade up 0.4 percent by 0950 GMT, after a tepid open following weak China inflation data.

“Year-to-date Europe has been doing surprisingly well in terms of market performance, but the data is still looking pretty bad,” said Martin Moeller, portfolio manager at UBP in Geneva.

Weak car sales data weighed on autos which tumbled 0.6 percent, the worst-performing sector. Car manufacturers BMW, Daimler, and Volkswagen were among the biggest fallers on the DAX.

European car sales dropped 4.6 percent in January, industry data showed, the fifth consecutive month of declines after tougher emissions test procedures became mandatory from the start of September.

Investors are also looking to a Feb. 17 deadline for the U.S. Commerce Secretary to release a report about whether European car imports pose a national security threat.

The European market was dragged down on Thursday by very weak U.S. retail sales data but was nonetheless on track for its first weekly gain in four, having hit a three-month high on Wednesday.

The Spanish government’s widely-expected decision to call a snap election did not move the IBEX which traded up 0.4 percent at 1000 GMT.

Some strong results helped the STOXX up.

French media giant Vivendi climbed 4.6 percent after reporting strong results for its Universal Music Group arm, and confirming it would soon select financial advisors to sell a stake of up to 50 percent in UMG.

“UMG has continued to deliver strong organic revenue growth with paid streaming accelerating quarter-on-quarter throughout 2018,” said UBS analysts.

Vivendi also announced its top stakeholder, billionaire Vincent Bollore, would further withdraw from the company’s management.

Bollore, another of the billionaire’s companies, climbed 4.6 percent.

German insurer Allianz managed a 1.1 percent gain after it reported results in line with expectations.

“We think the combination of operational strength and capital management discipline shines through once again,” wrote KBW analysts.

Telecom Italia was a top gainer, up 6.2 percent after a source said Italian state lender CDP has authorization to increase its stake in the firm to 10 percent within the next 12 months.

Eutelsat sank 7.7 percent, the biggest faller on the STOXX, after its first half results. A trader said the company’s CEO A talked down the possibility of consolidation in the industry.

Swedish defense firm Saab climbed 6 percent after its fourth-quarter earnings beat expectations and it forecast better margins and sales in 2019.

M&A also moved some shares.

German internet portal Scout24 surged up 12.6 percent to the top of the STOXX after it welcomed a higher offer from a private equity consortium of Hellman & Friedman and Blackstone.

Analysts at Liberum said the bid values Scout24 at too low a multiple, raising the possibility industry peers may look to buy some or all the assets.

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Ontario government launches public consultations on auto insurance system review

TORONTO – The Ontario government is reviewing the province’s auto insurance system in a bid to lower rates for drivers.

It says it will examine practices in other jurisdictions to find ways to make improvements and introduce more competition in the system.

The Progressive Conservative government also says it will consult with drivers, insurance companies and other stakeholders until Feb. 15 to find ways to lower rates.

A report commissioned by the previous Liberal government found in 2016 that Ontario had the most expensive auto insurance premiums in Canada despite also having one of the lowest levels of accidents and fatalities.

The Liberals had promised an average decrease of 15 per cent in insurance rates by August of 2015 and when that self-imposed deadline passed, then-premier Kathleen Wynne admitted it had been what she called a “stretch goal.”

Finance Minister Vic Fedeli said the government will also create a regulatory framework that allows for modernization in the auto insurance sector.

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European shares on track for worst quarter since 2011

LONDON (Reuters) – European shares closed lower for a second day on Friday as weak European and Chinese data renewed worries about global growth and sent a pan-European benchmark on course for its worst quarter since 2011.

The euro zone STOXX 600 index ended the day down 0.72 percent and on course for a 9.5 percent loss on the quarter.

As the bell rang, Wall Street indexes were sharply lower as the growth angst added to nerves about U.S.-China trade talks

A summit in Brussels where European Union leaders told British Prime Minister Theresa May they would not be renegotiating the Brexit agreement did little to lift the mood.

Sterling was down O.75 percent and British blue chips .FTSE and midcaps .FTMC lost 0.65 percent and 0.86 percent respectively.

Investors shunned equities after data showed China’s November retail sales grew at the weakest pace since 2003 and industrial output rose the least in nearly three years as domestic demand softened further.[L3N1YJ1GY]

Borrowing costs in the euro area fell as the weak Chinese data added to Euro zone businesses ending 2018 in a gloomy mood, expanding their operations at the slowest pace in over four years.

Adding to the poor sentiment, the European Central Bank cut forecasts for economic growth and inflation on Thursday.

“It looks like the seasonal rally has been put back again, with slowing growth figures from around the globe turning investors cautious once again”, commented IG analyst Chris Beauchamp.

The carmaker and auto supplier sector .SXAP was down 1.44 percent, the biggest loser. A drop in European car sales last month deepened worries about slowing demand following the introduction of tougher new emissions tests.

The luxury sector was also in focus after Hennessey, Moet and Louis Vuitton owner LVMH (LVMH.PA) announced plans to buy boutique hotel group Belmond (BEL.N) in a deal worth $3.2 billion.

While the deal will shore up its niche hospitality business, analysts questioned whether it will be a significant boost to earnings. LVMH ended the day down 1.5 percent.

M&A dominated other headlines too. German online classifieds company Scout24 (G24n.DE) jumped 13.6 percent, topping the STOXX 600 leader board after the FT reported it was exploring a sale that could see it taken out of the market in one of the country’s largest leveraged buyouts in years.

GVC Holdings (GVC.L) hit the jackpot ahead of a UK parliamentary vote on legislation next week that Citi analysts say will remove a risk of a major cash outlay to former Ladbrokes shareholders.

The stock was up 9 percent, the top gainer on the FTSE 100.

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China to halt additional tariffs on U.S.-made cars as trade dispute de-escalates

BEIJING (Reuters) – China will suspend additional tariffs on U.S.-made vehicles and auto parts for three months starting Jan. 1, 2019, the country’s finance ministry said on Friday, following a truce in a trade war between the world’s two largest economies.

The Ministry of Finance, in a statement on its website, also said it hopes China and the United States can speed up negotiations to remove all additional tariffs on each other’s goods.

“This is a good signal that China and the United States are on track to solve the trade war,” said Wang Cun, director of the China Automobile Dealers Association’s import committee. “Car makers might be ordering a large number of imported cars now.”

Shortly after the Chinese finance ministry’s announcement, Tesla Inc (TSLA.O) said it had cut prices on its Model S and Model X vehicles in China.

Joe Hinrichs, president of Ford Motor Co’s (F.N) Americas unit, also welcomed China’s announcement, noting that the U.S. automaker exported nearly 50,000 U.S.-built vehicles to the country in 2017.

“As a leading exporter of vehicles from the U.S., we are very encouraged by China’s announcement today,” Hinrichs said. “We applaud both governments for working together constructively to reduce trade barriers and open markets.”

Auto exports between the two countries are however relatively small. China exported 53,300 vehicles to the U.S. market last year and imported 280,208 U.S. manufactured vehicles, according to data from the China Automotive Technology and Research Center (CATARC), a government-affiliated think-tank.

In contrast, in the first 11 months of this year, China produced 25.3 million cars, down 2.6 percent from the same period last year, industry figures showed.

Wang said car makers in China that imported cars from the United States had seen a 30 percent decline in volume in the first ten months of the 2018, but the tariff cut would bring imports back to previous levels.

The latest announcement on the planned tariff suspension followed China’s first major purchase of U.S. soybeans since U.S. President Donald Trump and his Chinese counterpart Xi Jinping’s landmark talks on trade in Argentina on Dec. 1.

The tariff suspension and soybean purchase are early signs that the bitter trade war between China and the United States may be starting to thaw.

In Argentina, Trump and Xi agreed to a truce that delayed the planned Jan. 1 U.S. increase of tariffs on $200 billion worth of Chinese goods while they negotiate a trade deal.

A Trump official said on Tuesday that China had agreed to cut tariffs on U.S.-built cars and auto parts to 15 percent from 40 percent.

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China’s tariff cut was communicated during a phone call between Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin, the official said.

Earlier this year, China hiked its tariffs on U.S. autos and parts after the United States raised its tariffs on Chinese vehicles and parts to 27.5 percent.

China will now suspend 25 percent tariffs on 144 U.S. vehicle and auto part items and 5 percent tariffs on 67 auto items between Jan. 1 and March 31, the finance ministry said.

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European shares fall on doubts over U.S.-China trade truce

LONDON (Reuters) – European shares fell on Tuesday led lower by auto stocks as investors started to question whether the truce agreed by the United States and China on their trade dispute would lead to a long-term deal.

After enjoying a rally for its first day of trading in December, Germany’s DAX .GDAXI – the most sensitive to China and trade war fears – fell 1.1 percent, while the broader pan-European STOXX 600 index declined 0.8 percent.

“The number one driver for global risk sentiment is the U.S.-China trade talks, which suddenly don’t look as promising as they did over the weekend,” Commerzbank rates strategist Christoph Rieger wrote.

The European automotive sector .SXAP, which is most sensitive to trade war fears, was the biggest sectoral faller, down 1.7 percent. Shares in German carmakers Volkswagen (VOWG.DE), Daimler (DAIGn.DE) and BMW (BMWG.DE) fell between 1.6 and 3 percent.

The tech sector .SX8P was also a big loser, down 1.4 percent. Chipmakers, which are also heavily exposed to China and trade, sustained heavy losses with AMS (AMS.S) down 5.1 percent, Siltronic (WAFGn.DE) down 8.1 percent.

Adding to the weak sentiment, the yield curve between U.S. three-year and five-year notes and between two-year and five-year inverted on Monday, a first since the financial crisis, excluding very short-dated debt.

Analysts now fear an inversion of the two-year, 10-year yield curve could be imminent and point towards a possible U.S. recession.

“Recessionary fear is starting to raise its ugly head,” wrote Stephen Innes at broker Oanda.

Top faller on the STOXX 600 was IG Group (IGG.L), down 9.7 percent, after the British online trading platform forecast a drop in first half 2019 revenues as it suffered from newly-introduced limits on ordinary individuals making highly-leveraged financial bets.

French catering group Elior (ELIOR.PA) sank 8.6 percent after cutting its sales growth outlook, and Belgian postal services firm Bpost (BPOST.BR) plunged 22.8 percent after a profit warning.

France’s JCDecaux (JCDX.PA) fell 2.9 percent after Exane BNP Paribas reinitiated its coverage of the stock with an “underperform” rating.

Energy stocks .SXEP gave up earlier gains as crude prices came off highs on worries that demand would stall due to a Sino-U.S. trade war, and that Russia remained a stumbling block to a deal to cut global crude supply.

BP (BP.L) however rose 0.9 percent and Royal Dutch Shell (RDSa.AS) ended flat.

German industrial gases group Linde (LINI.DE) will replace British bank Barclays (BARC.L) on the leading index of pan-European stocks STOXX Europe 50 .STOXX50, STOXX Ltd, the operator of Deutsche Boerse Group’s index business, said.

The change comes as part of the quarterly reshuffle and will be effective at the opening of European trading on Dec. 24, STOXX said on Monday. Linde shares rose 2.1 percent and Barclays was down 2.6 percent.

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European stocks drop to two-week low on growth, trade nerves

LONDON (Reuters) – Worries about U.S. bond markets signaling an impending recession and a still rumbling trade war between the world’s two biggest economies sent European shares sinking further on Wednesday after a 3 percent drop on Wall Street.

The pan-European STOXX 600 was down 1.2 percent by 0830 GMT, hitting its lowest level since Nov 23, with Germany’s DAX .GDAXI, France’s CAC 40 .FCHI, and Britain’s FTSE 100 .FTSE all falling 1.3 percent.

Financials were the biggest drag on European shares as investors dumped sectors highly sensitive to economic growth. Europe’s bank index .SX7P fell 1.7 percent, in line with tech .SX8P after the highly valued U.S. tech sector sold off.

German carmakers Daimler (DAIGn.DE), Volkswagen (VOWG_p.DE), and BMW (BMWG.DE) fell 0.5 to 0.8 percent, outperforming the DAX as investors digested what seemed a relatively positive outcome from auto executives’ meeting at the White House.

President Trump pressed the carmakers to increase investments in the United States, something the executives said they planned to do but wouldn’t be able to if the administration went ahead with threatened tariffs.

White House economic adviser Larry Kudlow, among those in the meeting, said he did not think that car tariffs were imminent.

Shares in valve manufacturers Rotork (ROR.L) and Weir (WEIR.L), which supply the oil industry, tumbled 3 to 5 percent after U.S. energy services firm Schlumberger (SLB.N) gave a warning on Tuesday, saying a drop in fracking activity would hit its North America revenues.

M&A news was also a driver.

Shares in Shire (SHP.L) jumped 4 percent at the open, then trimming gains to trade up 2 percent, after shareholders of Japan’s Takeda approved the takeover of the London-listed pharmaceutical firm.

Broker notes hit some stocks. Hargreaves Lansdown (HRGV.L) fell 5.4 percent after Morgan Stanley cut its rating to underweight.

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European shares fall on doubts over U.S.-China trade truce

LONDON (Reuters) – European shares fell on Tuesday led lower by auto stocks as investors started to question whether the truce agreed by the United States and China on their trade dispute would lead to a long-term deal.

After enjoying a rally for its first day of trading in December, Germany’s DAX .GDAXI – the most sensitive to China and trade war fears – fell 1.1 percent, while the broader pan-European STOXX 600 index declined 0.8 percent.

“The number one driver for global risk sentiment is the U.S.-China trade talks, which suddenly don’t look as promising as they did over the weekend,” Commerzbank rates strategist Christoph Rieger wrote.

The European automotive sector .SXAP, which is most sensitive to trade war fears, was the biggest sectoral faller, down 1.7 percent. Shares in German carmakers Volkswagen (VOWG.DE), Daimler (DAIGn.DE) and BMW (BMWG.DE) fell between 1.6 and 3 percent.

The tech sector .SX8P was also a big loser, down 1.4 percent. Chipmakers, which are also heavily exposed to China and trade, sustained heavy losses with AMS (AMS.S) down 5.1 percent, Siltronic (WAFGn.DE) down 8.1 percent.

Adding to the weak sentiment, the yield curve between U.S. three-year and five-year notes and between two-year and five-year inverted on Monday, a first since the financial crisis, excluding very short-dated debt.

Analysts now fear an inversion of the two-year, 10-year yield curve could be imminent and point towards a possible U.S. recession.

“Recessionary fear is starting to raise its ugly head,” wrote Stephen Innes at broker Oanda.

Top faller on the STOXX 600 was IG Group (IGG.L), down 9.7 percent, after the British online trading platform forecast a drop in first half 2019 revenues as it suffered from newly-introduced limits on ordinary individuals making highly-leveraged financial bets.

French catering group Elior (ELIOR.PA) sank 8.6 percent after cutting its sales growth outlook, and Belgian postal services firm Bpost (BPOST.BR) plunged 22.8 percent after a profit warning.

France’s JCDecaux (JCDX.PA) fell 2.9 percent after Exane BNP Paribas reinitiated its coverage of the stock with an “underperform” rating.

Energy stocks .SXEP gave up earlier gains as crude prices came off highs on worries that demand would stall due to a Sino-U.S. trade war, and that Russia remained a stumbling block to a deal to cut global crude supply.

BP (BP.L) however rose 0.9 percent and Royal Dutch Shell (RDSa.AS) ended flat.

German industrial gases group Linde (LINI.DE) will replace British bank Barclays (BARC.L) on the leading index of pan-European stocks STOXX Europe 50 .STOXX50, STOXX Ltd, the operator of Deutsche Boerse Group’s index business, said.

The change comes as part of the quarterly reshuffle and will be effective at the opening of European trading on Dec. 24, STOXX said on Monday. Linde shares rose 2.1 percent and Barclays was down 2.6 percent.

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Toyota, Honda U.S. sales fall in November

(Reuters) – Sales of new Toyota and Honda cars in the United States both fell in November, the Japanese carmakers said on Monday, pointing to an overall dip in U.S. industry numbers last month in the face of rising car prices and interest rates.

Toyota Motor Corp (7203.T) sales, which rose 1.4 percent in October, fell about 0.6 percent to 190,423 units last month, due to decreased demand for its Prius and Camry sedans, the company said.

Honda Motor Co Ltd (7267.T) said its sales fell 9.5 percent to 120,534 vehicles, more than doubling the pace of decline as it was hurt by lower volumes on passenger cars like its Civic.

Overall U.S. car sales dipped 2 percent last year from a record high of 17.55 million in 2016 and are expected to decline further in 2018. However, a fall in November would be the first since 2009 in a month when dealers traditionally offer deals to clear stock ahead of the new year.

Industry watchers have said that interest in replacing older cars is finally waning after nearly a decade of robust new car sales while rising interest rates and trade tariffs have pushed up the costs of buying.

There was progress in talks with China this weekend, but President Donald Trump has still threatened to impose a broad 25 percent tax on cars imported into the United States, potentially inflating prices further.

To make up for slowing sales, automakers have cut jobs and curtailed production of traditional passenger cars, while gradually moving to larger SUVs and trucks, which tend to be more profitable.

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Autos and miners drag Europe down as weak China and trade fears sap confidence

LONDON (Reuters) – European shares fell back on Friday as weak data from China rekindled anxiety over slowing growth and investors fretted ahead of Saturday’s crucial G20 talks between U.S. President Trump and China’s Xi Jinping over trade.

The pan-European STOXX 600 opened marginally up but rapidly fell into negative territory, down 0.5 percent by 0930 GMT. Germany’s DAX .GDAXI, the most sensitive to China due to its big exporters, fell 0.6 percent.

The DAX was set for its fourth straight month of losses – its longest losing streak since 2008. The pan-European STOXX was set for its second straight month of losses as November, and a disappointing earnings season, draw to a close.

Investors’ hopes of a partial recovery in stock markets in December – known as a “Santa rally” – hang on the leaders’ discussions resulting in a truce or de-escalation of the U.S.-China trade war.

“There are only two people in the world that can deliver a Santa rally, Trump and Xi, and I don’t see that happening,” said Peter Garnry, head of equity strategy at Saxo Bank in Copenhagen.

Garnry saw a 60 to 65 percent chance of the Trump-Xi talks resulting in “no deal”.

China reported its weakest factory growth in more than two years on Friday, reigniting fears about growth ahead of crucial trade talks.

“The weak data out of China is increasingly a little bit of a surprise. Most investors would have anticipated that at least some of that stimulus six months ago would have had an impact, but this really tells us how big the headwinds are,” said Garnry.

Autos stocks .SXAP were the worst-performing, down 1.4 percent, on the data and anxiety over tariffs.

German car bosses are finalizing plans to visit the White House next week to discuss trade policy, German and U.S. officials said.

Car parts makers were among the worst-performing stocks, with Hella (HLE.DE), Valeo (VLOF.PA), and tire maker Faurecia (EPED.PA) down 2.4 to 4.9 percent.

Daimler (DAIGn.DE) dragged the DAX down with a 2.7 percent fall, while peers BMW (BMWG.DE) and Volkswagen (VOWG_p.DE) fell 0.8 to 0.9 percent.

“The problem with Europe is that… quite a lot of our industrial supply chain and capital goods manufacturers have at least some exposure to the autos sector, so you can’t get away from it,” said Ian Ormiston, European smaller companies fund manager at Merian Global Investors.

HSBC analysts downgraded both Faurecia and Daimler to “reduce” from “hold”, saying a re-rating for the sector next year is “hard to imagine”. Tariff fears have led analysts to slash their earnings growth forecasts for the sector.

Mining stocks .SXPP fell 1.1 percent, hit by growth fears over China, the world’s top metals consumer.

Among the biggest drags on the STOXX were also luxury goods conglomerates Kering (PRTP.PA) and LVMH (LVMH.PA), down 1.8 percent each. Luxury stocks have been especially sensitive to slowing growth in China, high-end brands’ biggest market.

In single-stock moves Altice (ATCA.AS) shares surged 9.4 percent after the telecoms and cable firm announced its French unit had agreed to sell a 49.99 percent stake in its fiber optic business.

Zalando (ZALG.DE) fell 4.2 percent after Kepler Cheuvreux cut its price target on the stock, saying it has become more skeptical about the long-term potential for margins at the online retailer.

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Trump warns U.S. may cut off GM subsidies after job cuts

WASHINGTON (Reuters) – U.S. President Donald Trump said the White House is looking at cutting subsidies for General Motors Co (GM.N) after the largest U.S. automaker said it would close four plants in the United States and layoff thousands of workers.

Trump also criticized GM for not closing facilities in Mexico or China. “The U.S. saved General Motors, and this is the THANKS we get! We are now looking at cutting all @GM subsidies, including… for electric cars,” Trump said on Twitter. GM electric vehicles are eligible for a $7,500 tax credit under federal law, but it is not clear how the administration could restrict those credits. GM shares fell on Trump’s tweets.

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