Markets

European stocks take lead from Asian markets

TikTok deal and Covid-19 vaccine progress inspires positive mood

The European Stoxx 600 index was up 0.5 per cent in early trading on Monday, as were the UK’s FTSE 100 and Germany’s Dax, driven by the technology and energy sectors.

Mon Sep 14 2020 - 10:54

European stocks opened the week on a positive note, climbing following reports that Oracle had struck a deal for the US operations of Chinese video-sharing app TikTok, and news that AstraZeneca's coronavirus vaccine trial had resumed.

The European Stoxx 600 index was up 0.5 per cent in early trading on Monday, as were the UK’s FTSE 100 and Germany’s Dax, driven by the technology and energy sectors. That came despite rising coronavirus case numbers in the region.

Traders were emboldened following reports that Chinese tech group ByteDance had reached a preliminary "technical partnership" agreement with US software group Oracle for TikTok's American operations. The deal does not include a full sale of the app, which US President Donald Trump has threatened to ban after alleging it could damage national security.

Stake

Oracle, chaired by Trump administration supporter Larry Ellison, is likely to own a minority stake in TikTok's US business while addressing the White House's security concerns, it was reported.

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Asia-Pacific shares also climbed on Monday on the Oracle news, which has raised hopes of a resolution to a flashpoint in relations between Washington and Beijing.

Japan’s Topix index rose 0.9 per cent on Monday while South Korea’s Kospi climbed 1.2 per cent and Australia’s S&P/ASX 200 added 0.7 per cent. Hong Kong’s Hang Seng was up 0.8 per cent and China’s CSI 300 of Shanghai- and Shenzhen-listed stocks was up 0.5 per cent.

Adding to markets' positive hue on Monday was news that Oxford university and AstraZeneca were to resume the international clinical trial of their proposed coronavirus vaccine candidate after pausing it a week earlier due to a participant falling ill.

"Expect continued focus on tech this week, though risk sentiment overall may be boosted on weekend news that AstraZeneca would resume phase 3 vaccine trials in the UK," said Tapas Strickland, director of economics at National Australia Bank.

Futures markets pointed to gains for US technology stocks while shares in Japan’s SoftBank jumped by their most since March.

In Tokyo, shares in SoftBank rose as much as 10 per cent after it agreed to sell Arm Holdings to US chip company Nvidia for $40bn. Its disposal of the UK-based chip designer underscores the Japanese conglomerate's shift towards becoming a global investment powerhouse.

The FT also reported that SoftBank executives had revived discussions about taking the group private based on frustrations over the longstanding discount in its shares compared to the value of its individual holdings.

Decision

Investors are also this week looking ahead to important central bank decisions, including those by the US Federal Reserve, the Bank of Japan and the Bank of England.

In currencies, sterling rose 0.3 per cent against the dollar to $1.2834 on Monday. The pound dropped 3.7 per cent last week as the UK government revealed legislation overriding big parts of its EU exit agreement, risking a collapse of trade negotiations with Brussels.

Analysts at Goldman Sachs said they believed the risk of the UK dropping out of the EU’s customs union and single markets without a trade agreement in place was lower than it may appear from last week’s drop in the pound. “For investors willing to look through some near-term volatility, current levels for sterling longs now look attractive in our view,” they said. – Copyright The Financial Times Limited 2020

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