December 31, 2018 / 8:46 AM / 24 days ago

European shares in tentative New Year's Eve rise after bruising 2018

LONDON (Reuters) - European shares closed slightly higher on Monday as soothing comments from Washington and Beijing about trade frictions between the world’s top two economies provided some comfort for investors as a bruising year in equity markets drew to a close.

Stock index price for France's CAC 40 and company stock price information are displayed on screens as they hang above the Paris stock exchange, operated by Euronext NV, in La Defense business district in Paris, France, December 14, 2016. REUTERS/Benoit Tessier

In a shortened session before New Year’s Eve celebrations, the STOXX 600 was up 0.5 percent, continuing to claw back from multi-year losses hit on Thursday.

France's CAC 40 .FCHI was up 1.1 percent, Spain's IBEX .IBEX was up 0.5 percent while Britain's FTSE 100 .FTSE was dragged lower by a stronger pound.

Volumes were thin with German and Milan bourses shut and many investors still away for the Christmas holidays.

Market mood brightened slightly after U.S. President Donald Trump said he held a “very good call” with China’s President Xi Jinping on Saturday to discuss trade and claimed “big progress” was being made.

Chinese state media were more reserved, saying Xi hoped the negotiating teams could meet each other half way and reach an agreement that was mutually beneficial.

Still, investors headed into 2019 licking their wounds after a torrid past year amid lingering worries about slowing global economic growth, trade frictions, expectations of more U.S. interest rate increases and the UK’s divorce from the European Union.

The pan European STOXX 600 had its worst year since Lehman Brothers imploded in 2008, while euro zone stocks put in their worst performance since 2011.

One major issue that has plagued markets this year - Italy’s budget crisis - was put to rest for now as Rome passed the 2019 budget just before a year-end deadline, averting a major showdown with Brussels.

Highlighting potential headaches for investors in 2019, data on Monday showed China’s factory activity contracted for the first time in over two years in December, as the world’s second-largest economy lost further momentum.

“Mixed Chinese PMI surveys have done little to help the growth story as (Chinese) stocks close out the year as the biggest losers,” said Josh Mahoney, market analyst at IG.

“Meanwhile, improving tones from both the U.S. and China on trade talks helped improve sentiment ahead of the new year.”

Auto and luxury goods stocks, which are vulnerable to rising protectionism and Washington’s row with Beijing, benefited the most from the conciliatory noises over the weekend. China is the biggest market for high-end retailers.

Valeo (VLOF.PA) topped France’s CAC 40, rising 3.9 percent, Michelin (MICP.PA) was up 2.5 percent and Peugeot gained 2.1 percent.

Gucci owner Kering (PRTP.PA) and LVMH (LVMH.PA) all rose between 2.2 and 4 percent.

The mining and resources sector .SXPP was another gainer, up 0.6 percent, buoyed by stronger copper prices even as most industrial metals headed for losses in 2018. [MET/L] The sector dropped almost 18 percent this year.

In individual moves, APRIL (APRL.PA) surged to its highest since May 2011 after private equity firm CVC Capital Partners said it was in exclusive talks with French peer Evolem to buy its majority stake in the French insurer.

Reporting by Josephine Mason; editing by Julien Ponthusand David Stamp

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