European stocks on course for 5th straight gain, unfazed by Brexit negotiator’s exit

European stocks headed higher Monday, on course to post a fifth straight advance, with U.K. stocks faring well in the wake of the sudden resignation of David Davis, the U.K.’s top negotiator with the European Union over Brexit.

How markets are moving

The Stoxx Europe 600 index  rose 0.6% to 384.51, paced by gains for tech and consumer services shares. But the utility and telecom sectors were lower. The pan-European index on Friday gained 0.2%, and finished last week with a rise of 0.6%.

France’s CAC 40 index added 0.6% to 5,405.51, while Germany’s DAX 30 index rose a more modest 0.2% to 12,517.49. In London, the FTSE 100 index  picked up 0.3% to 7,640.25. Spain’s IBEX 35  moved up 0.3% to 9,931.10.

The euro traded at $1.1773, up from $1.1744 late Friday in New York. The pound  rose roughly 0.5% to $1.3345.

What’s driving the market

European equities keyed off advances in Asian equity markets, including in China where the Shanghai Composite  shot up 2.5%. Some analysts say global stock markets were buoyed by Friday’s rally on Wall Street  , which came after the nonfarm payrolls report showed more U.S. jobs were created in June than expected and wage inflation remained subdued.

Those U.S. stock gains came even after Washington on Friday implemented tariffs on $34 billion in Chinese imports and Beijing responded with levies on the same value of 545 U.S. goods. The moves were seen as the start of a trade war between the world’s two largest economies.

Brexit minister exits

Meanwhile in London, investors pulled up both the FTSE 100 blue-chips index and the more domestically focused FTSE 250  index despite the sudden resignation Sunday night of David Davis, who lead the U.K.’s Brexit discussions with the European Union.

On Friday, U.K. Prime Minister Theresa May appeared to have united her cabinet around a new Brexit plan after a day of wrangling at her Chequers retreat. But with Davis stepping down, that potentially puts that new plan at risk.

The “general direction of policy will leave us in at best a weak negotiating position, and possibly an inescapable one,” Davis said in his resignation letter.

It also looks likely to throw May’s government into chaos, especially if she goes on to face a formal challenge to her leadership from within her own Conservative Party. The odds on that happening and of a new general election this year are seen as having shortened.

But the pound held firm to its rise after Davis told the BBC’s “Today” program on Radio 4 that he was not planning a leadership challenge against May.

The U.K. government on Monday named Dominic Raab, former housing minister, as Davis’s successor.

What strategists are saying

• “We’ve been saying that what matters for [pound] markets is the type of Brexit delivered — not who delivers,” said Viraj Patel, foreign exchange strategist at ING, in a note. “So at this stage, one is inclined to interpret Davis’s resignation as a sign that the U.K. government is steering towards a softer Brexit — which is the more powerful, positive [sterling] driver.

But one should be wary that the next few days could be quite noisy in terms of the U.K. political landscape, so it’s all about waiting on the sidelines and pouncing for the right opportunity to go long GBP,” said Patel.

• “So far, the U.S. has imposed tariffs on $34 billion of imports from China, as did China on U.S. imports. This stage has been clearly priced in and when looking at Asian equity performance today, investors seem unconvinced that an all-out trade war will be launched. However, given President Trump’s unpredictability, the upside momentum is likely to remain limited, particularly in cyclical stocks until we have more clarity on trade,” said Hussein Sayed, chief market strategist at FXTM, in an note.

Stock movers

Air France-KLM SA shares  flew up 7.6% following June traffic data which showed a 3.7% rise year-on-year in the number of passengers it carried, to 9.3 million.

Renault SA shares   fell 1.8% as its partner, Japanese auto maker Nissan Motor Co.  , said Monday it’s discovered “misconduct” at its plants in Japan in final tests of emissions and fuel economy of its vehicles, as there were “inspection reports based on altered measurement values.” Nissan shares fell 4.6% in Tokyo ahead of the statement.

TGS-NOPEC Geophysical Co. shares  leapt 7.7% after the Norwegian oilfield-data provider said it expects second-quarter 2018 net revenue of $158 million, or 47% higher than in the second quarter of 2017.