European stocks finished higher Monday, posting a fifth-straight advance, with U.K. stocks getting a boost from the pound’s drop on upheaval within the British government.
U.K. Foreign Secretary Boris Johnson’s resignation raised the chance of a formal challenge to Prime Minister Theresa May.
The Stoxx Europe 600 index SXXP, +0.28% rose 0.6% to end at 384.59. The pan-European index on Friday gained 0.2%, and finished last week with a rise of 0.6%.
In London, the FTSE 100 index UKX, +0.15% was up 0.9% to close at 7,687.99. France’s CAC 40 index PX1, +0.41% added 0.4% to finish at 5,398.11, while Germany’s DAX 30 index DAX, +0.11% rose 0.4% to 12,543.89.
The euro EURUSD, -0.1023% traded at $1.1745, little changed from $1.1744 late Friday in New York. The pound GBPUSD, -0.0679% fell roughly 0.6% to $1.3208.
A weaker pound can provide a boost to the FTSE 100 as its multinational companies generate most of their sales in foreign currencies.
European equities keyed off advances in Asian equity markets, including in China where the Shanghai Composite SHCOMP, +0.44% shot up 2.5%. Some analysts say global stock markets were buoyed by Friday’s rally on Wall StreetSPX, +0.88%DJIA, +1.31% which came after the nonfarm payrolls report showed more U.S. jobs were created in June than expected and wage inflation remained subdued.
Those U.S. stock gains came even after Washington on Friday implemented tariffs on $34 billion in Chinese imports and Beijing responded with levies on the same value of 545 U.S. goods. The moves were seen as the start of a trade war between the world’s two largest economies.
Late Friday, U.K. leader May seemed to have united her warring cabinet around a new Brexit plan after a day of wrangling at her Chequers retreat. But the Sunday night resignation of David Davis, the minister in charge of negotiating Britain’s exit from the European Union, put that new plan at risk.
Yet the pound briefly was rallying after Davis told the BBC’s “Today” program on Radio 4 that he was not planning a leadership challenge against the prime minister.
However, Johnson’s resignation on Monday ramped up speculation that he’s preparing to launch a leadership challenge against May.
• “The pound initially traded higher versus the dollar and the euro on Monday, albeit off session highs, as investors cheered the potential for a softer Brexit, “ said Fiona Cincotta, senior market analyst at City Index, in a note.
But then Johnson’s exit “has seen the pound plummet. Whilst David Davis’ resignation was no threat to May’s leadership, Johnson’s resignation provides Conservatives with an alternative leader,” Cincotta wrote.
• “So far, the U.S. has imposed tariffs on $34 billion of imports from China, as did China on U.S. imports. This stage has been clearly priced in and when looking at Asian equity performance today, investors seem unconvinced that an all-out trade war will be launched. However, given President Trump’s unpredictability, the upside momentum is likely to remain limited, particularly in cyclical stocks until we have more clarity on trade,” said Hussein Sayed, chief market strategist at FXTM, in an note.
Air France-KLM SA shares AF, -2.10% rose 6.3% following June traffic data which showed a 3.7% rise year-on-year in the number of passengers it carried, to 9.3 million.
Inmarsat PLC shares ISAT, -0.08% leapt 7.2%, with Morgan Stanley saying that American rival EchoStar Corp. SATS, +2.07%could attempt a new takeover offer for the British satellite-communications company. EchoStar on Friday dropped its bid after Inmarsat’s rejection.
“Though there may be some disappointment in the market at the lack of an offer, when the dust settles, there has been an interested buyer at 532 pence, Echostar still has a sizeable stake in the company, and they theoretically could decide to return after six months,” wrote Morgan Stanley analyst Terence Tsui in a note late Friday.”
Renault SA shares RNO, +0.20% fell 0.5% as its partner, Japanese auto maker Nissan Motor Co. 7201, +3.79% said Monday it’s discovered “misconduct” at its plants in Japan in final tests of emissions and fuel economy of its vehicles, as there were “inspection reports based on altered measurement values.” Nissan shares fell 4.6% in Tokyo ahead of the statement.
TGS-NOPEC Geophysical Co. shares TGS, +2.02% leapt 5.9% after the Norwegian oilfield-data provider said it expects second-quarter 2018 net revenue of $158 million, or 47% higher than in the second quarter of 2017.
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