August 29, 2018 / 7:58 AM / a year ago

European shares bounce as trade deal hopes lift risk appetite

LONDON (Reuters) - European shares rose on Wednesday as optimism over talks between the United States and Canada reinvigorated risk appetite, though the FTSE came under pressure from a rise in sterling.

The German share price index DAX is seen at the stock exchange in Frankfurt, Germany, August 23, 2018. REUTERS/Staff/Remote

The STOXX 600 index STOXX ended the session up 0.3 percent.

The United States and Mexico agreed on Monday to overhaul the NAFTA trade association, while investors waited to see if Canada would accept a revised deal.

Canada and the U.S. are set to tackle their issues in talks on Wednesday.

However, some market watchers were cautious in their expectations, given the ongoing trade tensions between the U.S. and China.

“The agreement between the U.S. and Mexico has not put worries about President Trump’s trade policy to bed. The deal is more protectionist than the status quo, and Canada is not included,” economists at Capital Economics said in a note.

“Despite the U.S. compromising a bit with Mexico, we are not holding out much hope of a ceasefire with China any time soon.”

Britain's FTSE 100 .FTSE came under pressure from a rise in sterling, however, and ended the session down 0.7 percent.

Comments from the European Union’s chief Brexit negotiator Michel Barnier that the bloc was prepared to offer Britain an unprecedentedly close relationship after it quits the EU sent the currency higher, in turn weighing on the FTSE 100 and its predominantly dollar-earning constituents.

Among individual stocks, Germany’s RTL (RRTL.DE) gained more than 2 percent after reporting forecast-beating growth in second quarter revenues and core earnings.

Shares in Spain’s Inditex (ITX.MC), however, dropped 5.7 percent after Morgan Stanley rated the Zara owner “underweight” for the first time.

France’s Ingenico (INGC.PA) was also under pressure, losing more than 6 percent. One trader cited competition between Amazon and the French company on mobile payments in Asia.

Micro Focus (MCRO.L), the British software company, added 2.9 percent after it started a share buy-back program.

Among small caps, Sinclair Pharma SPH.L surged around 35 percent after agreeing to an offer from China’s Huadoing.

Reporting by Julien Ponthus and Kit Rees; Editing by Andrew Bolton

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