Europe midday: Stoxx breaks record as Trump hints at China trade deal

(Sharecast News) - European shares hit record highs on Friday despite the prospect of a clash between US President Donald Trump and the Federal Reserve over monetary policy, while traders also mulled the widely expected hike in Japanese interest rates. The benchmark Stoxx 600 was up 0.37% at 532.26 in early deals, having hit 533.24. Trump's hint at a possible trade deal with China in his address to the World Economic Forum boosted sentiment, along with a call for lower crude oil prices and indication he could lower corporate taxes.

However, he also said he would demand that interest rates drop "immediately", raising eyebrows among traders and analysts.

"Except for the aim of lowering energy prices, most of Trump's wishes are inflation-boosters," said Swissquote Bank analyst Ipek Ozkardeskaya.

"PS: interfering with a central bank's independence has never been a good idea. If the monetary policy starts serving the government goals - so explicitly - you end up like Turkey - roasted."

Energy stocks were lower after Trump's call on Saudi Arabia and OPEC to reduce prices. Shares in heavyweights Shell, BP and TotalEnergies were down. Oil prices were higher, with Brent crude up 0.35% to $74.88.

In economic news, private sector activity in the eurozone has expanded for the first time in five months, according to flash estimates out on Friday, as service-sector growth continued and the manufacturing downturn eased slightly.

The initial reading of the composite purchasing managers' index (PMI) was 50.2 for January, up from 49.6 in December, according to S&P Global and the Hamburg Commercial Bank (HCOB).

This was the first reading above the neutral 50-point level since August and ahead of market expectations of 49.7.

Meanwhile, the Bank of Japan lifted its key rate to around 0.5% - the highest level since the financial crash of 2008.

In equity news, shares in Burberry surged after the rate of sales decline eased significantly in the luxury fashion brand's third quarter as recent actions to turn the business around started to bear fruit.

The news also lifted sector peers Kering and Montcler.

Monte dei Paschi fell as the Italian bank launched a €13bn takeover offer for larger rival Mediobanca.

Telecommunications equipment maker Ericsson after Q4 operating profits fell short of expectations on the back of a slowdown in India.

Reporting by Frank Prenesti for Sharecast.com