Europe midday: Stocks hit record high on China-US trade deal

European stocks had risen to a record high by midday on Monday as investors cheered news of a ‘phase one’ trade agreement between the US and China.

The benchmark Stoxx Europe 600 index was up 1.2% at 416.78, having reached a record high of 416.83 earlier, while France’s CAC 40 was 0.9% higher at 5,974.85. Germany’s DAX was up 0.6% at 13,367.91, underperforming its peers after some disappointing data.

Speaking to CBS’s Face the Nation on Sunday, US Trade Representative Robert Lighthizer said a deal between the two nations was "totally done" and will nearly double US exports to China over the next two years.

"Although a bumpy road still lies ahead, we think the worst of the trade war probably lies behind us," said Danske Bank.

Sentiment was also underpinned by stronger-than-expected Chinese data. Retail sales rose 8% year-on-year in November versus a 7.2% increase the month before and expectations of 7.6% growth. Industrial output increased 6.2% on the year compared to 5% growth in October and expectations of a 4.7% jump.

On the eurozone macroeconomic front, data released earlier showed that business activity in the area remained weak in December as a slight upturn in the services sector was offset by further weakness in manufacturing.

The IHS Markit flash eurozone purchasing managers’ index was unchanged from November at 50.6, coming in a touch below consensus expectations of 50.7 and just above the 50.0 mark that separates contraction from expansion.

The flash PMI for the services sector ticked up to 52.4 in December from 51.9 the month before, hitting a four-month high. However, the manufacturing index fell to 45.9 from 46.9 in November, which was a two-month low.

The flash German manufacturing PMI declined to 43.4 in December from 44.1 the month before, missing expectations for a reading of 44.5. However, the German services PMI printed at a four-month high of 52.0 from 51.7 in November, in line with expectations. That left the composite PMI unchanged at 49.4.

The flash composite PMI for France came in at 52 in December from 52.1 in November and compared to expectations for a reading of 52.4. The services index rose to a four-month high of 52.4 from 51.9 while the manufacturing index dipped to 50.3 from 51.7 in November, hitting a three-month low.

Chris Williamson, chief business economist at IHS Markit, said: "The eurozone economy closes out 2019 mired in its worst spell since 2013, with businesses struggling against the headwinds of near-stagnant demand and gloomy prospects for the year ahead."

He said Germany’s steep manufacturing downturn has added to the chance of its economy contracting slightly in the fourth quarter.

In corporate news, H&M shares rose even as the Swedish fashion retailer’s fourth-quarter sales missed analysts’ expectations.

On the downside, Electrolux shares tumbled more than 10% after the Swedish home appliance manufacturer said its North American business would incur costs of around $70m in the fourth quarter, up from a previous estimate of $25m.