Post-holiday catchup for Germany drives European stock gains By Reuters

© Reuters. The German share price index DAX graph at the stock exchange in Frankfurt

(Reuters) – A surge in the Frankfurt stock market as German and Swiss investors returned from a one-day holiday drove European shares higher on Tuesday as investors eyed Washington closely for further bursts of protectionist rhetoric.

Optimism over President Donald Trump’s decision late on Friday to hold off on imposing import tariffs on Mexico has lifted sentiment this week, but there were new signs that the administration will make more threats to further its agenda in talks with major trading partners.

Secretary of State Mike Pompeo warned on Monday that the United States could still slap tariffs on Mexico if not enough progress was made on its commitment to stem illegal immigration.

Europe’s pan-regional index rose 0.43% by 0714 GMT, with Frankfurt’s outperforming.

Car industry shares rose 1.6% with German auto stocks BMW, Daimler and Volkswagen (DE:) AS, lifting the tariff sensitive sector.

Madrid’s bank-heavy IBEX was the only laggard, after Morgan Stanley (NYSE:) lowered its estimates for bank earnings in Spain to an average 4% in 2020 and 6.5% in 2021, factoring in a flatter yield curve as a result of the European Central Bank’s swing toward taking new steps to reduce market interest rates.

Among stocks, Hugo Boss rose 3.7% after shares of the German fashion house were upgraded to „equal-weight“ from „underweight“ by Morgan Stanley for the luxury retailer’s strategic plan to reposition the brand under two labels.

Ted Baker tumbled 26% after the fashion retailer warned on annual profit after an „extremely difficult“ start to 2019.

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