* Trade deal hopes lift auto, mining stocks
* HSBC falls as 2020 outlook darkens
* Luxury stocks gain as LVMH proposes offer for Tiffany
(Updates to close, changes comments, recasts throughout)
By Shreyashi Sanyal
Oct 28 (Reuters) - European shares touched their highest
level since January 2018 on Monday, boosted by carmakers and
miners on hopes that the United States and China were closer to
getting a trade deal, while a drop in banks led by HSBC
capped gains.
U.S. President Donald Trump said he expected to sign a
significant part of the trade deal with China ahead of schedule
but did not elaborate on the timing. This helped the S&P 500
index on Wall Street hit a record high.
Among the major regional indexes, export-heavy
Frankfurt-listed shares rose 0.4%, while the
pan-European STOXX 600 index gained 0.3%.
European automakers jumped 1.8%, hitting a near
six-month high, while commodity-linked stocks rose 1.5%.
"If the Phase 1 (of the U.S.-China trade deal) has been
agreed upon, it's a massive step forward - that is a strong and
real signal to investors that progress is being made," said
Craig Erlam, senior market analyst, UK & EMEA at OANDA.
The latest development on U.S.-China trade comes as
investors are trying to gauge its impact on European corporate
earnings. After the three busiest weeks of the reporting season,
companies have managed to deliver modest beats to earnings
expectations but analysts say that the bar had been lowered.
"There is probably more of an upside to price to what we're
seeing in terms earnings and it's not been as bad as feared a
few weeks ago," Erlam said.
Defensive plays like utilities, food & beverage
and telecoms lost between 0.5% and 0.3% as
appetite for riskier sectors increased and as investors moved
back into growth sectors in response to the more positive tone
on the political front.
This has included the European Union agreement for a
three-month flexible delay to Britain's departure from the bloc,
while Prime Minister Boris Johnson pushes for an election.
Also aiding the upward move was a rise in luxury stocks on
new M&A activity.
Louis Vuitton owner LVMH made a proposal to buy
U.S. jeweller Tiffany & Co with a $14.5 billion offer.
While LVMH shares edged lower, rivals Swatch,
Pandora and Salvatore Ferragamo traded
higher.
BANKS FEEL THE BURN
Europe's largest bank HSBC slipped 3.7%, after it
dropped its 2020 profit target, and said it would undertake a
costly restructuring against the backdrop of a gloomy business
environment in Europe and the United States.
HSBC shares pulled the banking index 0.4% lower and
kept the European blue-chip index in the red.
"HSBC did cite weakness, but that's not massively unexpected
given what's going on the wider growth dynamics," said Will
James, senior investment director, European equities at Aberdeen
Standard Investments.
Another disappointment among banks was Spain's Bankia
, down 1.8%, after it signalled lending income could
fall slightly in 2019 compared to 2018, hurt by ultra-low
interest rates which are expected to erode margins further.
Investors will look to the U.S. Federal Reserve's meeting
later this week for more clarity and potential support for a
slowing economy.
Among other stocks, shares in Nokia touched a new
6-year low after Bank of America Merrill Lynch removed the
company from its Europe 1 list after its dismal earnings report
last week.
(Reporting by Shreyashi Sanyal and Sruthi Shankar in Bengaluru;
additional reporting by Lisa Mattackal and Agamoni Ghosh;
Editing by Arun Koyyur and Jane Merriman)
HSBC Holdings (HSBA)