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StockBeat: European Stocks Fly on Trade, Brexit Hopes

By Geoffrey Smith

Investing.com -- Europe’s stock markets leaped on Friday on optimism that two of the biggest uncertainties weighing on the world economy can be resolved, at least partially.

The double boost came from encouraging words from President Donald Trump on the progress of trade negotiations with China, and, more concretely, from an apparent breakthrough in the talks between the EU and U.K. that may pave the way for a smooth British departure from the bloc at the end of the month.

By 5:15 AM ET (0915 GMT), the Stoxx Europe 600 was up 1.2% at 387.46, while the export-heavy German DAX was up 1.8%.

The U.K. FTSE 100 lagged as the pound surged, hitting its export-sensitive multinationals. However, the biggest U.K.-focused stocks all made rapid gains, with Lloyds Banking Group (LON:LLOY) rising nearly 9%, Royal Bank of Scotland (LON:RBS) rising 6.5% and housebuilder stocks Barratt and Persimmon (LON:PSN) rising 6.9% and 9.2% respectively.

EasyJet (LON:EZJ), another company whose business model was at acute risk from a disorderly Brexit, rose 6.1% and even the staid insurance groups Aviva (LON:AV) and Legal & General (LON:LGEN) rose 5% and 3.5% respectively.

The move suggests a greater confidence in a deal being avoided than official comments on Friday might have warranted. EU Council President Donald Tusk, at least, was still hedging his bets

Tusk added in a statement that “Unfortunately, we are still in a situation in which the UK has not come forward with a workable, realistic proposal,” and said that a deal at next week’s summit meeting would be impossible if no such proposal was received by the end of the day.

There was plenty of non-Brexit news going on elsewhere: SAP (DE:SAPG) shares rose 9% after the company announced a strong rise in cloud-based revenues in the third quarter, hours after saying Bill McDermott would step down as CEO after a decade in the job. That comes only a couple of months after activist investor Elliott Management took a stake on the company.

In France, meanwhile, advertising group Publicis (PA:PUBP) fell 14% after cutting its profit guidance for the year again, while Renault (PA:RENA) shares rose 3.3% on reports that the board has voted to oust Thierry Bollore as CEO in an effort to get its alliance with Nissan back on track. Nissan too appointed a new CEO earlier this week.

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