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European Markets Mostly Higher After Huawei Gets Temporary Reprieve

Riding on a temporary reprieve granted to Chinese telecommunications major Huawei Technologies Co by the Trump administration, European stocks are moving higher on Tuesday, rebounding from losses in the previous session.

However, the upside is somewhat limited in most of the markets in the region, as the impact of the ongoing trade war between the U.S. and China, and tensions in the Middle East continue to weigh on sentiment and prompting investors to stay cautious.

Investors are also tracking news on the Brexit front, besides digesting the latest Economic Outlook published by the Organisation Organization for Economic Co-operation and Development.

Late on Monday, the U.S. government decided to temporarily ease some trade restrictions on Huawei. Following the decision, the U.S. Commerce Department will now allow the Chinese technology major to purchase US goods in order to maintain existing networks and provide software updates to existing Huawei handsets.

However, Huawei will not be allowed to buy American parts and components to manufacture new products without license approvals.

Technology shares, which suffered a severe setback on Monday after the ban on Huawei, have come back strongly in today's session.

The pan European Stoxx 600 is up 0.65%. Among the major markets, Germany is up sharply, with its benchmark DAX climbing up nearly 1.1%. The U.K.'s FTSE and France's CAC 40 are up 0.75% and 0.64%, respectively. Switzerland's SMI is advancing 0.43%.

Shares of German chip maker AMS jumped nearly 7% in morning trades before paring some gains. The stock plunged more than 13% down on Monday.

Wirecard, up 3.5%, is the top gainer in the DAX index. Siemens, Adidas, HeidelbergCement, SAP, Allianz and Covestro are gaining 1 to 2%. Infineon is up 0.75%, after falling sharply in the previous session.

Daimler is gaining about 0.8% on reports the company is working on a cost cut programme to reach profit margin targets. Thyssenkrupp shares are also modestly higher, with investors reacting to an announcement from the company that its supervisory board will meet to decide on restructuring plans.

In the French market, STMicroElectronics has come back strongly after recent setback. The stock is up nearly 4%, riding on the temporary reprive granted to Huawei by the Trump administration.

Atos, ArcelorMittal, Valeo, Dassault Systemes, Technip, Sodexo, Hermes International, Schneider Electric and Renault are among the other prominent gainers in the French market.

Engie is down more than 4% on reports France's finance ministry is preparing to reduce its stake in the natural gas distribution company from 24% to around 15% within a year.

A Reuters report said French businessman Jacques Veyrat, who has a controlling stake of over 50% in renewable energy group Neoen, is likely to sell Neoen to Engie in return for a small take in Engie.

Sage, J Sainsbury, Micro Focus, Coca Cola, Antofagasta, Intu Properties, Marks & Spencer, United Utilities and Standard Chartered are among the prominent gainers in the UK market.

Royal Mail is down more than 5% and Merlin Entertainment is declining 3.1%.

In economic news, the Organization for Economic Co-operation and Development has downgraded the global growth outlook for 2019 as trade disputes hurt manufacturing and investment decisions.

In its latest Economic Outlook, the agency forecast 3.2% growth for 2019 instead of 3.3% estimated in March. The global outlook for 2020 was retained at 3.4%.

"The fragile global economy is being destabilised by trade tensions," OECD chief economist Laurence Boone, said.

"Growth is stabilising but the economy is weak and there are very serious risks on the horizon. Governments need to work harder together to ensure a return to stronger and more sustainable growth," Boone added.

The OECD forecast the U.S. economy to grow 2.8% in 2019 before slowing to 2.3% in 2020. Growth in euro area is seen at 1.2% this year and 1.4% next year.

China's growth is expected to ease to 6.2% in 2019 and to 6% next year.

Meanwhile, the Industrial Trends survey from the Confederation of British Industry showed that UK manufacturing orders hit its lowest level since October 2016,

The order book balance dropped to -10% from -5% in April. At the same time, the export order books balance slid to -16%, the lowest since July 2016.

On the Brexit front, the new Brexit deal from the U.K. Prime Minister Theresa May is expected to contain promises on workers' rights and environmental protections, according to a report in The Times. The move is likely to put pressure on opposition Labour Party leader Jeremy Corbyn as some members may now support the bill.

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