European Stocks Recover as Wall Street Defends Gains

Europe’s main stock markets enjoyed a late recovery on Thursday as Wall Street held on to most of the previous day’s strong gains, dealers said.

But gloomy news out of Rome weighed on sentiment after Italy’s economy officially entered recession.

London was buoyed by upbeat corporate earnings, with drinks group Diageo shares cheered for a share buyback and solid earnings, while energy giant Royal Dutch Shell stock jumped on soaring annual profits.

Wall Street was steady in the late New York morning, having come back from a weaker opening which pared Thursday’s Fed-inspired gains as traders eyed possible progress in US-China trade talks.

But Tesla shares fell after the surprise exit of the carmaker’s chief financial officer.

In Italy meanwhile, official data showed that the eurozone’s third largest economy shrank 0.2 percent in the final quarter of last year after a 0.1 percent drop in the third quarter.

The technical definition of a recession is economic contraction for two quarters in a row.

“The risk of recession in the eurozone is something that has been widely discussed for weeks now but the news that Italy has fallen into technical recession still comes as a blow to the region,” Oanda analyst Craig Erlam told AFP.

– ‘Others could follow’ –

“Others could also follow with Germany having posted negative growth in the third quarter. This is naturally weighing on sentiment,” Erlam warned.

But Ferrari shares were the exception in otherwise morose Milan dealing rooms, roaring ahead by more than 10 percent on the back of an upbeat earnings forecast by company chief Louis Camilleri.

Meanwhile, data for all the eurozone economy showed a sharp growth slowdown to 1.8 percent in 2018 after 2.4 percent the previous year, as slumping German exports and Brexit worries sapped momentum.

However, growth hit an anaemic 0.2 percent in the October to December period, the same as the previous quarter, the Eurostat agency added.

Italy’s recession places intense pressure on the nation’s populist government headed by Prime Minister Giuseppe Conte, who took power in June on the back of big-spending electoral promises.

“This (recession) should not really be a surprise given the direction of travel of recent data,” CMC Markets analyst Michael Hewson told AFP. “The problem EU policymakers have is that it looks as if it could well be much more serious than originally thought.”

– Key figures around 1640 GMT –

London – FTSE 100: UP 0.4 percent at 6,968.85 points (close)

Frankfurt – DAX 30: DOWN 0.1 percent at 11,173.10 (close)

Paris – CAC 40: UP 0.4 percent at 4,992.72 (close)

Milan – FTSE MIB: DOWN 0.2 percent at 19,730.78

EURO STOXX 50: DOWN 0.1 percent at 3,159.43

New York – Dow: FLAT at 25,006.32

Tokyo – Nikkei 225: UP 1.1 percent at 20,773.49 (close)

Hong Kong – Hang Seng: UP 1.1 percent at 27,942.47 (close)

Shanghai – Composite: UP 0.4 percent at 2,584.57 (close)

New York – Dow: UP 1.8 percent at 25,014.86 (close)

Pound/dollar: UP at $1.3134 from $1.3116 at 2200 GMT

Euro/pound: DOWN at 87.19 pence from 87.53 pence

Euro/dollar: DOWN at $1.1453 from $1.1480

Dollar/yen: DOWN at 108.88 yen from 109.04

Oil – Brent Crude: UP 56 cents at $62.10 per barrel

Oil – West Texas Intermediate: UP 95 cents at $55.18