European Asian Stock Markets

Europe Stocks Firm on EU Elections, Merger Talks; Asia Steady as Trump Visits Japan

The U.S. and U.K. equity markets were closed on Monday due to the Memorial Day holiday, but there was activity in Europe and Asia although volume was below average. In Europe, investors were primarily focused on the outcome of the European parliamentary elections. Asian investors remained committed to U.S.-China trade and technology relations.

In the cash market, the FTSE 100 settled at 7277.73, up 46.69 or +0.65 percent. In Germany, the DAX finished at 12071.10, up 60.14 or +0.50 percent and France’s CAC rose to 5336.19, up 19.68 or +0.37 percent.

The price action in Europe was driven by the results of the EU parliamentary elections and the news that Fiat Chrysler and Renault are in early merger talks.

As far as the election results are concerned, they showed a strong showing for Liberal and Green parties, while euroskeptic groups in Britain and France held gains they achieved in 2014.

The details revealed that pro-EU parties are still expected to make up the majority of the Parliament, holding on to about two-thirds of the seats. Additionally, right-wing populist parties in both the U.K. and France made strong gains, led by Nigel Farage’s Brexit Party and Marine Le Pen’s National Rally, respectively.

The auto sector was driven higher, led by shares of Renault, which surged after Fiat confirmed it had filed a proposal for a merger with its French rival. In a press release, Fiat said the joint organization would produce estimated sales of 8.7 million vehicles a year and would be considered the world’s third largest car manufacturer. Shares of Fiat Chrysler rose 8%, while Renault stock jumped nearly 12%.

Asia Finishes Mixed with China Markets Ending Higher

Earlier in the day, shares in Asia were mixed with stocks rallying in China as investors eyed developments from President Trump’s state visit to Japan. Traders were also watching the results from the European parliamentary election, which ended up having little effect on prices.

In the cash market, Japan’s Nikkei 225 Index settled at 21182.58, up 65.36 or +0.31 percent. Hong Kong’s Hang Seng Index finished at 27288.09, down 65.84 or -0.24 percent and China’s Shanghai Index closed at 2892.38, up 39.38 or +1.38.

President Trump visited Japan, where he said Tokyo has “had a substantial advantage” over Washington for “many years.” However, he softened his tone later by saying Tokyo and Washington were “getting close” to a deal that would address the U.S. trade deficit. Recent data from the U.S. Trade Representative showed the U.S. had a deficit of $56.8 billion in goods and services with Japan in 2018.

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James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.