Huawei Restrictions Loosen, Euro Shares Rise

HUAWEI – The US government decided to temporarily ease trade restrictions that were slapped upon China’s Huawei last week. This move boosted European stock markets, which grabbed back some losses.

The pan-European STOXX 600 index rose 0.4 percent. Germany’s DAX, which is sensitive to trade tensions and China-related news, outperformed other indexes after the US Commerce Department said that Huawei Technologies could purchase American goods.

European chipmakers also perked up on the news. Chipmaker shares had previously tumbled after reports said that they may halt shipments to Huawei.

The tech sector gained more than 1 percent after previously shedding nearly 3 percent on Monday.

Auto stocks climbed around 0.4 percent. Daimler buoyed the sector further after German newspaper Handelsblatt reported that the company was considering a 20 percent-cut in administration costs.

The banking index rose 0.7 percent after previously closing at a three-month low during the previous session.

Fewer companies are reporting their earnings as the earnings season is nearing the end. Italy’s Telecom Italia was the biggest gainer on the STOXX 600, posting Q1 earnings that met expectations. The figures also confirmed its guidance for the next three years.

Meanwhile, investors are still careful given the sudden 360-degree turn in the US-China trade negotiations over the last two weeks.

European stocks have beaten Wall Street performance since the trade war re-ignited on May 9. The STOXX 600 increased 0.4 percent but the US benchmark S&P 500 index lost nearly 1 percent in the same period.

Huawei Restrictions Pulled Back

Further into the news, the US Commerce Department said that Chinese telecoms giant Huawei Technologies would be permitted to buy US-made goods to maintain existing networks and to provide software updates to existing Huawei handsets.

However, Huawei is still not allowed to buy American goods and components for new products without acquiring license approvals.

The US government said that the restrictions were because of the company’s involvement to threats on US national security and foreign policy interests.

US Secretary of Commerce Wilbur Ross said that the lift in the restrictions should give telecoms operators that use Huawei equipment time to make arrangements.

“In short, this license will allow operations to continue for existing Huawei mobile phone users and rural broadband networks,” said Ross.

The license will be effective until August 19.

“The goal seems to be to prevent internet, computer, and cell phone systems from crashing.  This is not capitulation; this is housekeeping,” said a former Commerce Department official.

On the flip side, Huawei founder Ren Zhengfei said that the temporary easing wasn’t really significant since it had been making preparations for such a situation.

“The US government’s actions at the moment underestimate our capabilities,” said Ren during an interview, according to a transcript provided by Chinese state broadcaster.