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European Equity Benchmarks Close Higher; UK Requests June 30 Brexit Extension

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The broad-based major European indices closed higher in Friday trading led by mining and semiconductor stocks.

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In economic news, UK Prime Minister Theresa May has written to the European Union to request another delay for Brexit until June 30. May said that if UK MPs approve a deal in time, the UK should be able to leave before European Parliamentary elections on May 23. However, she said that the UK would field candidates for the elections in case the MPs still can’t reach an agreement.

Meanwhile, European output of automobiles and auto parts declined for the sixth month running in March, according to IHS Markit. The rate of contraction eased slightly since February, but remained steep as new orders dropped at its strongest rate since December 2012. Employment fell at the fastest rate since November 2012, and input prices declined for the first time in nearly three years, although only marginally.

Metals and mining was also another weak sector in March as output fell for the seventh straight month, and at the fastest rate since January 2013. Metal producers also lowered their prices for the second consecutive month.

The beverages and food sector led the output growth rankings in March despite a slight easing in the rate of expansion from February’s nine-month high. Software and services registered the strongest rate of job creation in March, while automobiles and auto parts posted the sharpest reduction.

And Eurostat, the statistical office of the European Union, reported that the EU28 seasonally adjusted current account of the balance of payments recorded a surplus of EUR38.6 billion ($43.3 billion), or 1.0% of GDP, in Q4 of 2018, up from a surplus of EUR36.2 billion, or 0.9% of GDP, in Q3 of 2018, and down from a surplus of EUR57.2 billion (1.5% of GDP) in Q4 of 2017.

Compared with Q3 of 2018, based on seasonally adjusted data, the surplus of the goods account increased in Q4 of 2018 as did the surplus in the primary income account. The surplus of the services account fell, while the deficit of the secondary income account increased, as did the deficit of the capital account.

In Q4, based on non-seasonally adjusted data, the EU28 recorded external current account surpluses with the US (+EUR67.7 billion), Switzerland (+EUR23.9 billion), Canada (+EUR9.5 billion), Brazil (+EUR5.9 billion), Hong Kong (+EUR5.7 billion), India (+EUR2.0 billion) and Japan (+EUR0.3 billion). Deficits were registered with China (-EUR28.5 billion) and Russia (-EUR13.3 billion).

The highest surpluses were reported in Germany (+EUR67.6 billion), the Netherlands (+EUR27.5 billion), Italy (+EUR13.3 billion), France (+EUR7.1 billion) and Spain (+EUR6.6 billion). The largest deficits were in the UK(-EUR21.5 billion), Greece (-EUR3.9 billion), Belgium (-EUR3.8 billion), (Romania (-EUR2.2 billion) and Poland (-EUR1.8 billion).

In the UK, the most recent KPMG and REC, UK Report on Jobs, showed that heightened uncertainty toward the outlook bolstered the fastest decline in permanent staff appointments since mid-2016 in March. Brexit related uncertainty also contributed to a further steep decline in staff availability.

The report, which is compiled from responses to questionnaires sent to a panel of around 400 UK recruitment and employment consultancies, showed that permanent staff appointments fell for the second time in three months in March, and at the quickest rate since the aftermath of the Brexit referendum vote in July 2016. Concurrently, billings received from the employment of short-term staff rose at the second-slowest rate for two-and-a-half years.

Meanwhile, UK House prices in Q1 were 2.6% higher than in the year-ago quarter, according to the Halifax House Price Index. Q1 house prices were 1.6% higher than in the preceding quarter. On a monthly basis, house prices fell by 1.6% to an average of £233,181.

“This reduction partly corrects the significant growth seen last month and again demonstrates the risk in focusing too heavily on short-term, volatile measures” said Russell Galley, managing director of Halifax. “Industry-wide figures show that the number of mortgages being approved remains around 40% below pre-financial crisis levels, and we know that lower levels of activity can lead to bigger price movements.”

In Germany, production in industry was up 0.7% in February on the previous month on a price, seasonally and calendar adjusted basis, according to the Federal Statistical Office (Destatis).

In February, production in industry excluding energy and construction was down 0.2% month on month. Within industry, the production of capital goods increased 0.6%, while the production of intermediate goods decreased 0.6%, and production of consumer goods rose 1.6%. Outside industry, energy production was down 3.1%, and the production in construction was up 6.8% in February month on month.

And in Italy, the Italian National Institute of Statistics’ (Istat) monthly report on the Italian economy found that risks related to the international economy outlook remain to the downside, considering the ongoing trade conflicts between China and the US, the uncertain outcome of Brexit and the generalized slowdown of global trade.

Istat also said that industrial production index is back on a positive pattern as well as the industrial orders, and that February data confirmed a substantial stability of the Italian labor market conditions with unemployment increasing only marginally.

In equities, mining stocks helped buoy the FTSE in London as Anglo American and Evraz rose 22% and 1.9% respectively, while Rio Tinto and BHP Group were up 1.7% and 1.6%. Insurance firm Prudential led all gainers, climbing 2.7%, followed by health care company NMC Health, and automaker Rolls Royce, each of which closed 2.5% higher. Public relations firm WPP increased 2%, while construction materials supplier CRH, and packaging company Smurfit Kappa Group were up 1.9% and 1.7%.

In Frankfurt, construction materials supplier HeidelbergCement, and semiconductor company Infineon led the DAX higher, rising 1.7% each, followed by pharmaceutical firm Bayer, and industrial conglomerate Siemens, which were up 1.3% and 1.2% respectively. Pharmaceutical company Merck, and electricity and natural gas supplier RWE climbed 1% each, while industrial gases company Linde, and tire maker Continental, closed 0.08% higher and internet company Wirecard rose 0.9%.

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And in Paris, oilfield services firm TechnipFMC, and semiconductor company STMicroelectronics led he CAC higher, rising 3.9% and 2.8% respectively, followed by facilities management services provider Sodexo, and auto parts supplier Valeo, which climbed 1.9% and 1.6%. Luxury goods company Kering gained 1.5%, while aerospace and defense firm Safran, and steel and mining company ArcelorMittal each closed 1.2% higher.

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