European stocks have opened higher as calm returned to the market following a sharp sell off on Friday driven by the US-China trade war.
The FTSE 100 was 0.6 per cent higher by 8.30am, Germany’s Dax had climbed 1.1 per cent, France’s CAC 40 was up 0.7 per cent, and the pan-European Euronext 100 had risen 0.6 per cent.
The rise followed a mixed night for stocks in Asia. China’s SSE Composite index ended 1.5 per cent higher but Hong Kong’s Hang Seng was 0.05 per cent higher at 8.30am.
European markets were buoyed by China holding its currency the renminbi relatively steady. It is allowed to fluctuate two per cent either side of a benchmark which was today set above expectations at 7.021 per dollar.
The renminbi has been at the centre of the latest battle in China’s ongoing trade dispute with the US. It fell to the seven-per-dollar level not seen since the financial crisis last week, raising fears of a currency war between the two countries.
Stock markets tumbled after the Trump administration officially labelled China currency manipulators, accusing it of seeking an unfair trade advantage by artificially making its goods cheaper.
Indices ended in the red again on Friday after Trump said that the US was “not ready to make a deal” with China.
“The People’s Bank of China fixed the yuan above the seven mark against the US dollar in a bid to cushion the blow of the tariffs on imports,” said David Madden, market analyst at CMC Markets.
“It hasn’t been a major devaluation, and traders got used to the idea that a fixing above the seven mark could become the new normal.”
Madden said China’s tech firm Huawei was a sticking point in the talks. “Previously, the US promised to loosen the restrictions on the Chinese tech giant, and he appears to have done a U-turn.”
“Technology, national security, and intellectual property rights are an important component of the trade negotiations, so this is likely to hold up the prospect of a deal,” he said.
(Image credit: Getty)