UKX FTSE 100 Index

By Paul J. Davies 

European stocks shrugged off a weak performance in Asia to post gains on Thursday, while oil prices recovered some ground after falling into a bear market in the previous session.

The Stoxx Europe 600 gained 0.6% in opening trade. Germany's DAX ticked up 0.5% while the U.K. FTSE 100 climbed 0.7%.

U.S. oil prices had dropped more than 22% below their April peak in recent days as growth concerns and a rise in U.S. production led to a big rise in U.S. crude inventories. Wider fears about the global economy slowing have hit Brent crude prices, too, but not by as much. However, banks have maintained their forecasts for higher prices this year and WTI rebounded Thursday, rising 0.25% at $51.81 on Thursday, while global benchmark Brent crude was 0.8% higher at $61.10.

U.S. futures pointed to opening gains on Wall Street on Thursday of more than 0.3% for both the Dow Jones Industrial Average and the S&P 500.

As stock markets have been hit by growth fears, government bond prices have rallied and yields declined. That continued Thursday with the U.S. 10-year Treasury yield falling further to 2.102% from 2.119%, while the German bund hit a new record low of minus 0.238%, according to Tradeweb during morning trading ahead of a rate decision from the European Central Bank on Thursday.

The collapse of merger talks between Renault and Fiat Chrysler hit shares of both companies. Renault was hit hardest, tumbling 7.8% in early trade, while its existing partner Nissan was down 1.7%% in Japan. Fiat Chrysler shares slipped 0.2% in Italy, but Renault's French rival Peugeot SA was up 2.3% on hopes that it may get a tie-up with Fiat instead.

Fears about the impact of President Trump's various standoffs with the U.S.'s leading trade partners on the health of the global economy have hurt stock markets in recent weeks. But U.S. indexes extended a rebound on Wednesday, with the S&P 500 rising 0.8%. That came after the Federal Reserve signaled it could cut rates to boost economic growth and the central bank's "beige book" reported modest growth in April and May.

That momentum didn't carry over into Asian markets Thursday. Shares in Shanghai were down 1.2%, while those in Tokyo were flat.

The U.S. and Mexico were set to enter the second day of negotiations on Thursday that could avert tariffs being imposed on the Central American country. President Trump's spat with Mexico is likely to mean an immediate spike in car prices, according to some economists, which are one of the biggest exports into the U.S. from its southern neighbor. That, in turn, would hurt demand.

"While the exact price elasticity of vehicle demand is hard to quantify, it is possible to imagine a 25% tariff bringing down overall vehicle demand by 3m+ units, or an 18%+ reduction," said Emmanuel Rosner, an economist at Deutsche Bank.

Italian yields also fell despite the decision by European authorities to declare that the country is in breach of its debt reduction agreements, which could heighten political tensions between the country and the bloc. Italian 10-year yields were down to 2.474% from 2.489%.

Gold rose 0.6% to $1,341.00 an ounce.

Write to Paul J. Davies at paul.davies@wsj.com

(END) Dow Jones Newswires

June 06, 2019 07:34 ET (11:34 GMT)

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