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StockBeat - Europe at Nine-Month High on Signs of Chinese Rebound

By Geoffrey Smith

Investing.com -- Europe’s stock markets are rallying again on Tuesday, on increasing confidence that the world economy is coming out of a six-month slowdown, and on hopes that the EU and U.S. will avoid making their trade quarrel any more serious.

At 04:20 AM ET (0820 GMT), the benchmark Euro Stoxx 600 was up 1.5 points, or 0.4% at 389.54, its highest level since July last year. Germany's Dax was leading the way, up 0.7%, while the FTSE 100 was up 0.3%.

Data showing a solid increase in Chinese house prices has been the immediate trigger, but they merely add to recent evidence that the world’s second-largest economy is bottoming out, responding to fiscal and monetary stimulus measures from Beijing.

Other macro issues are also helping. Markets have responded particularly brightly to the recent drip of news out of trade talks between China and the U.S., suggesting that they’re close to an agreement to remove the threat of a full-blown trade war for the foreseeable future.

EU members also last week signed off on a mandate for the European Commission in trade talks with the U.S. The talks are unlikely likely to lead anywhere in the short term, due to political resistance from France, but they may at least stop the U.S. imposing new tariffs on EU exports.

Such issues generally outweigh many of the company-specific problems punctuating this week’s news. Volkswagen (DE:VOWG_p), for example, has hit a 10-month high this morning despite Monday’s news that German prosecutors have filed charges against former CEO Martin Winterkorn – a step that also raises questions over current board members such as Chairman Hans Dieter Poetsch.

Corporate news so far Tuesday has been mixed. Italy’s Unicredit (MI:CRDI) is up 1.0% after announcing it would pay $1.3 billion to settle U.S. allegations of violating sanctions. German online retailer Zalando (DE:ZALG)has risen over 10% after announcing better-than-expected results for the first quarter late Monday, but airlines are under pressure after Germany’s Lufthansa (DE:LHAG) warned its first-quarter loss would be wider than expected due to higher fuel costs.

French media group Vivendi (PA:VIV) was down 2.0% after shareholders voted to approve a buyback that will increase the stake of its biggest shareholder, Vincent Bollore. The move had been opposed by corporate governance activists who argued the step allowed Bollore to sidestep requirements on making an offer to all shareholders.

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