European shares jumped to their highest level in six weeks as signs of a detente in the trade war between the United States and China lifted markets from Wall Street to Beijing. The pan-European STOXX 600 jumped 1.8 percent and Germany's trade-sensitive DAX climbed 2.6 percent, with industrials, tech and car stocks the biggest drivers of gains across the region.
Markets rose overnight after a report that US Treasury Secretary Steven Mnuchin discussed lifting some or all tariffs imposed on Chinese imports and suggested offering a tariff rollback. A Bloomberg report saying China has offered to ramp up imports from the United States in order to reconfigure trading relations between the two countries delivered an extra boost to equities on Friday.
The tech index led the way with a 3 percent surge, its strongest day since mid-October taking it to a six-week high. Chipmakers STMicroelectronics and AMS were among the top gainers.
The autos sector climbed 2.7 percent, bringing its year-to-date gains to 9 percent. Carmaker shares have been hit by the US-China trade war as well as threatened US tariffs on car imports from Europe. Trade-sensitive industrials stocks Siemens and Airbus, as well as luxury shares Richemont, Kering and LVMH, were among top boosts to the STOXX.
Europe's banking sector recovered from the previous session's losses when a profit warning by France's SocGen hit the sector hard. Among results on Friday was French supermarket retailer Casino whose shares rose 6 percent as traders and analysts said fourth-quarter sales had weathered "Yellow Vest" anti-government demonstrations in France.
"France has held up well despite disruption from protests," Jefferies said in a research note. Lab testing company Eurofins Scientific shot up 8.7 percent after Berenberg kept a "buy" on the stock, saying negative views gained traction in late 2018, providing an opportunity. Optimism also came from small-cap German online meal-kit delivery service HelloFresh whose shares surged 21.5 percent after it raised its revenue forecast.
It was not all good news for European stocks though. Telecom Italia dropped 7.2 percent after it said it expected to report full-year organic core earnings of around 8.1 billion euros ($9.2 billion), a drop of under 5 percent compared to the year before. Another profit warning by Ryanair, which blamed lower-than-expected winter fares due to overcapacity, spooked investors, initially dragging the stock down.
By the close, shares in the budget airline were up 0.3 percent, underperforming the market, while rival easyJet also inched up 0.3 percent - one of the weakest FTSE 100 stocks. "This announcement was not wholly unexpected so we do not expect the shares to react by the full potential consensus net profit adjustment," Citi analysts said. Investors are bracing for swings in European stocks as earnings test whether fears about slowing economic and corporate growth that punished equities in recent months are a reality. Expectations are low. According to I/B/E/S Refinitiv, fourth-quarter earnings per share (EPS) for STOXX 600 companies are expected to have grown by 6 percent, half the levels seen in Q3 and Q4 2017.
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