European stocks rise on EU vote, car merger talk

With equity markets in the US and UK closed on Monday, the results of the European elections were in focus on continental European trading floors. (Reuters pic)

PARIS: European markets pushed higher Monday, relieved that centrists remain in control in the European parliament following a bloc-wide election, while the chance of a big merger in the auto industry also sparked confidence.

A positive statement on US-China trade talks from President Donald Trump added to the positive vibe, dealers said.

With equity markets in the US and UK closed on Monday, the results of the European elections were in focus on continental European trading floors.

Europe’s mainstream political parties took a hit in elections on Sunday but held off a strong surge by the populist right.

‘No dramatic upset’

“No dramatic upset,” said Berenberg economist Holger Schmieding in a note to clients.

“As the four major pro-European mainstream parties fell merely from 70% to 67% of the seats, the European Parliament can continue to work smoothly,” he said.

While Marine Le Pen’s far-right National Rally finished top in France, pro-EU President Emmanuel Macron’s centrist alliance was close behind.

“The catastrophe that some people predicted for Macron has not taken place and the RN has a significant score, but not a spectacular one,” analyst Zaki Laidi from the Cevipof political institute said.

Both the Paris and Milan exchanges benefited from strong gains in Fiat and Renault shares after a merger offer by Italian-US auto giant Fiat Chrysler to France’s Renault on Monday that would create the world’s third-largest automaker.

Fiat, Renault shares surge

Fiat Chrysler is widely seen as a latecomer to the electric vehicle market but does well in the US SUV and pick-up sectors.

Renault meanwhile has pushed ahead in electric cars but is relatively weak in North America so the two companies would be a good fit, experts said.

Fiat Chrysler shares accelerated by more than 10% in morning business, while those in Renault rose by nearly 8%.

Trump meanwhile spurred investor optimism by saying there was a “very good” chance of a deal with China as the world’s top two economies clash over their trade relationship.

“I think sometime in the future, China and the US will have a great trade deal and we look forward to that,” Trump said after talks in Tokyo with Japanese Prime Minister Shinzo Abe.

Asian markets made a tepid recovery Monday, with Tokyo rising 0.3%, while Shanghai closed 1.4% higher. But Hong Kong and Singapore each lost 0.2%.

The cautious recovery in Asia came after the Dow retreated for the fifth straight week, its longest losing streak since 2011.

Oil prices traded mixed after suffering a sudden rout last week due to a surprise increase in US crude and gasoline inventories.

Despite the OPEC output cap as well as US sanctions against Iran and Venezuela putting pressure on supplies, jitters over the US-China trade war have dampened future demand, keeping prices on the lower side.