Stocks rise on hopes US-EU may avoid trade war escalation

Stocks rose on both sides of the Atlantic Thursday as investors entertained a glimmer of hope that negotiations may yet soften the blow of an unfolding trade war between Washington and the European Union, dealers said.

Still, the gains came despite no sign of detente between Beijing and Washington, as tit-for-tat tariffs as set to take effect at midnight.

European car stocks surged after the US ambassador in Berlin, Richard Grenell, told bosses of Germany's biggest car firms that Washington was calling on the EU to bring tariffs to zero on car imports -- in exchange for equal treatment by the US.

The US is studying the possibility of imposing tariffs on autos on national security grounds.

European auto sector concerns were "easing a bit to boost the markets in Europe," Charles Schwab analysts said after German Chancellor Angela Merkel indicated she would back talks with trading partners on lowering automobile tariffs.

In Milan, Fiat Chrysler stock gained more than five per cent and in Paris, Peugeot and Renault were three per cent or higher.

German auto shares also rose across the board, with BMW up more than one per cent, while Daimler and Volkswagen added more than two per cent on the day.

On Wall Street, as traders returned to their desks after Wednesday's national holiday, markets reacted to solid US employment data, which offset worries about trade tensions.

US auto giants General Motors and Ford both gained, along with large technology names including Facebook and Google-parent Alphabet.

No choice but to fight

But analysts were quick to point out that the bigger trade war -- between the US and China -- is still happening as Washington is set to begin enforcing tariffs on nearly $34 billion in Chinese imports Friday.

Beijing has vowed to respond with its own tariffs immediately, arguing it has "no choice but to fight" and accusing Washington of "opening fire on the whole world" with the trade restrictions.

Greg McKenna, chief market strategist at AxiTrader, said "there has been a subtle but distinct shift in the number of voices who are now saying this could all end up in a big global mess with a huge hit to global growth".

But Thursday's gains suggest "perhaps that the tariff action has been priced in already and those market participants still don't think a full-fledged trade war will break out on the other side of it," said Briefing.com

Still, the website noted subsequently that "that perception could shift on the next headline."

Elsewhere, oil prices traded lower after US data showed a surprise increase in oil stockpiles and Saudi Arabia cut prices for crude sent to Asia.

The retreat also came after Trump called on OPEC to reduce prices.