European stocks nudged up to a record high this afternoon as investors reacted to a waning in Middle East tensions and renewed hopes of a US-China trade deal.
The pan-European Stoxx 600 index rose as much as 0.7 per cent to hit 421.43, before easing back to just under 420.
Germany’s Dax index jumped 1.4 per cent to an almost two-year high on strong industrial production figures for November, while France’s Cac was also trading higher.
It came after US President Donald Trump imposed more sanctions on Iran, defusing fears of military retaliation and reversing previous losses as investors rushed to safe-haven assets.
The bullish mood was further boosted when China confirmed it would sign a so-called phase one trade deal with the US during vice premier Liu He’s visit to Washington next week.
“Stock markets are strong this morning as US-Iran tensions have faded,” said David Madden, market analyst at CMC Markets.
“Yesterday afternoon President Trump issued a statement in relation to Iran, and he made it clear that he wasn’t pushing for an all-out war with the regime, which was a weight off traders’ minds. The strong finish in New York last night prompted buying in Asia overnight, so now the bullish sentiment has reached Europe.”
However, positivity in Germany – the bloc’s largest economy – was tempered by a fall in the country’s export figures.
“We would expect to see some improvement come through in German output as we look to the first half of this year, particularly as we see some modest improvement coming through in trade,” said David Page, senior economist at Axa Investment Managers.