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European shares near record highs after China eases US tariffs but sterling takes a hit

By Amanda Cooper

Deutsche Bank shares see a 14 per cent gain but uncertainty surrounding the UK’s post-Brexit trade relations rattles the pound

European shares neared record highs after the Chinese government said it would cut tariffs on some US goods, helping to ease some investor concern about a protracted trade dispute. Meanwhile, uncertainty surrounding the UK’s future trade relations rattled the pound.

On the commodity markets, oil prices fell as some of the world’s largest exporters met to discuss additional crude output cuts. This aims help prevent a surplus of unused fuel in light of how badly the coronavirus, which has already killed close to 500 people, has already affected Chinese demand.

China said it would halve tariffs on some US goods, which could help improve negotiating conditions for the next stage in a trade deal after the two nations reached a “phase one” deal in January.

In Frankfurt, the DAX neared all-time highs, propelled by a 14 per cent gain in shares of Deutsche Bank. This came after US investment fund Capital Group took a 3.1 per cent stake in Germany’s largest lender.

This was the largest one-day gain in Deutsche Bank shares since early December 2016.

The German blue-chip index closed at 13,574.82 points, marking a 0.72 per cent gain.

In London, the FTSE 100 closed up 0.3 per cent at 7,504.79 points. This was led by gains in retailer Kingfisher, which owns a number of home improvement chains such as B&Q and Screwfix, as well as financial services group Prudential and pharmagroup AstraZeneca.

On the foreign exchange markets, the pound sank against the dollar and the euro. Investor concern about a potentially bumpy road in negotiating Britain’s future ties with the EU have kept sterling under pressure over the past week.

Earlier in the day, foreign secretary Dominic Raab said he hoped Australia would be among the first high-profile signatories to any post-Brexit trade deals.

“GBP/USD is trading closer to 1.29, at the lowest since December. The US dollar continues benefiting from Wednesday's upbeat figures. Concerns about post-Brexit EU-UK relations are weighing on sterling,” said analysts at FXStreet.

The pound was last down 0.5 per cent against the dollar at $1.2932, while against the euro, sterling lost 0.4 per cent to trade at 84.86 pence.

The euro eased against the dollar after European Central Bank chief Christine Lagarde said there were signs of stabilisation in the euro zone economy, but growth remained modest. The euro was last down 0.1 per cent at $1.0981, around its lowest in a week.

On the commodity markets, oil prices fell, extending this week’s losses, after media reports that Russia would block the so-called “OPEC+” group of major exporters from making a temporary cut to their joint crude output.

The group, spearheaded by Saudi Arabia, had considered a temporary reduction of 600,000 barrels per day in response to the impact of the coronavirus on Chinese energy demand, according to a Reuters report earlier in the day.

Brent crude futures were last down 0.7 per cent on the day at $55 a barrel.

Gold, meanwhile, was up around 0.5 per cent on the day at $1,564 an ounce, narrowly off seven-year highs.

FURTHER READING: China to halve tariffs on some US imports

FURTHER READING: Low rates may hamper ECB says Christine Lagarde

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