(Bloomberg) -- Investors may be too busy buying the dip to worry about the fine print of this week’s upbeat headlines.

The Stoxx Europe 600 rose 0.6 percent in mid-morning trading, extending its two-day gain to 1.6 percent and wiping out last week’s declines. Cyclical shares have led the rally, with the trade-sensitive auto sector topping performance charts on Tuesday.

The dreary end to last week now feels increasingly distant as markets cheer the glimmers of hope emerging from U.S. President Donald Trump’s two stalemates: one with Democrats over funding for his border wall and another with China over a trade deal. Never mind that Trump has yet to agree to a tentative deal reached by congressional negotiators that gives him even less money for his wall than proposals he initially rejected, or that it is still unclear whether the U.S. and China can reach a deal before the March 1 deadline. Things at least look a little better than assumed earlier.

“The deadline will be extended,” Manish Singh, chief investment officer at Crossbridge Capital LLP in London, said of the trade negotiations. “The meeting is going on in good faith and that is key. There has not been a falling out or public sparring over any key issue.”

It also helps that expectations are growing for the European Central Bank to offer new long-term loans (so-called TLTROs) to banks and that the Federal Reserve has turned dovish, he said. “It tells you the market is not concerned about central banks spoiling it for them.”

Meanwhile, earnings in Europe aren’t exactly stellar on Tuesday:

  • That’s an understatement for Plus500, which is down a whopping 32 percent after saying 2019 profit will be much lower than expected
  • Thyssenkrupp’s earnings slide underscores the toll the trade war is taking on industrial companies
  • Even Kering’s gain after a solid report was modest, which might be because the shares already advanced considerably from their October trough and expectations were high after LVMH’s earlier results
  • Michelin was the exception, jumping 10 percent after projecting a resilient 2019
  • And Wessanen rose the most in nearly a decade after the Dutch food maker reported stronger-than-expected results

To contact the reporter on this story: Justina Lee in London at jlee1489@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Paul Jarvis, Jon Menon

©2019 Bloomberg L.P.

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