European stocks followed China’s lead higher on Monday after the Shanghai Composite hit a two-month high. The gains reversed early losses brought on by weakness in the oil price.

Chinese stocks hit two-month high after it was announced the state agency responsible for margin lending will restart loans to securities firms with interest rates below 3%. The positive message from top Chinese officials was mixed with Premier Li saying he does not favour a currency war but PBOC governor Zhou Xiachuan warning over corporate debt levels.

There was a fork in the road for China early this year between difficult reforms and reheating the economy and officials have clearly chosen the easy road. Markets like easy roads and easy monetary policy.

Leading the gains was Germany’s DAX index which spiked 200 points higher in just over an hour.

The British pound was an underperformer in currency markets after the resignation of MP and former Tory leader Ian Duncan-Smith. A bit of internal party bickering doesn’t normally impact Sterling but this time it has because of the possible implications for Brexit.

On the FTSE 100 healthcare shares were leading the gains with Shire gaining over 3% whilst basic materials shares were the main drag thanks to the fall in the oil price. The global healthcare sector is rebounding from the contagion last week over the decline in Bill Ackman-backed Valeant Pharmaceuticals.

Sainsbury’s was amongst the top risers after a broker upgrade helped the shares build on Friday’s gains when the supermarket was left as the only bidder for Home Retail group after Steinhoff International pulled out.  The market’s still seeing the Argos deal as a good one for Sainsbury’s, largely because of the inventive way in which it will pay for it. Broadly more positive sentiment towards the supermarket sector after three of the Big Four reported rising quarterly sales is helping the gains.

US stocks look set to open almost unchanged on Monday ahead of a shortened holiday week as anticipation builds towards the Apple product launch event that is expected to see a new smaller, cheaper iPhone released. A cheaper iPhone could well boost sales, especially in emerging markets but could also mean lower margins.

USA pre-opening levels

S&P 500: Unchanged at 2,049

Dow Jones: 16 points higher at 17,618

Nasdaq 100: 1 point higher at 4,411

 

 

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