Here’s What to Watch in European Stocks This Morning

(Bloomberg) -- Good morning. Here’s what we are watching ahead of the market open in Europe:

Trump-Xi Truce

The dinner meeting between the leaders of the U.S. and China appears to have had just the outcome markets were hoping for. Donald Trump and Xi Jinping agreed to prevent any escalation of the trade war between the two countries, which has cast a cloud on trading throughout the world in the second half of this year. Look for a reaction in all those sectors most battered by trade tensions between the pair, including semiconductors, miners and autos. Also for companies exposed to emerging markets rallying on the deal.

Brexit Threats

As one key risk in global markets appears to be on the path to receding, there is no such indication regarding Brexit. The opposition Labour Party has threatened a vote to bring down the government should parliament reject the Brexit plan Prime Minister Theresa May has presented. That could put the U.K. on course for another general election, so add that and a brewing battle over publishing legal advice to the list of subjects that which could impact the pound and U.K. stocks as the key vote approaches next week.

Crude Surge

Oil’s volatility in the past few months looks likely to continue through the remainder of 2018, with crude prices jumping after efforts across the world to support prices following the recent slump. Saudi Arabia and Russia extended their pact to manage the market and Canada’s largest producing province, Alberta, ordered unprecedented curbs on output. Perhaps not surprisingly, watch for European oil majors, explorers and services firms to have a good start to the week.

Yellow Vests

Paris is in the process of clearing up the debris after the “Yellow Vests” protests resulted in hundreds of arrests and people wounded. The ongoing unrest has created an unforeseen risk for French markets and for President Emmanuel Macron as a response is awaited and amid concerns this could jeopardize his reform agenda. Keep a close eye on the CAC 40 should the tensions further increase and the pressure on the president rise. Also, do watch political events in Spain, where a regional election in Andalusia saw an anti-establishment, far-right party do much better than expected in a traditional Socialist party stronghold.

Grout and Sealants

German chemicals giant BASF SE is said to be holding talks with private equity house CVC Capital Partners on a deal to combine their construction chemicals units, which make grouts and sealants. A merger could create a business worth around 6 billion euros. Watch for how investors take the news of a potential deal given BASF’s rough year so far, with shares down about 30 percent due to a margin squeeze and a fall in demand from automotive industry customers.

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