Europe midday: Stocks dip despite better-than-expected PMIs
By Alexander Bueso
Date: Thursday 21 May 2020
(Sharecast News) - Stocks in Europe are mired in the red despite gains on Wall Street overnight and a slight beat versus consensus on two key surveys for activity in the single currency bloc.
According to Chris Beauchamp at IG, buyers still had the upper hand in markets but "expectations of a sharp pullback are on the rise."
The result of that tug of war between bulls and bears had seen the late March rally morph into a contest of attrition between the two groups, he said.
As of 1240 GMT, the benchmark Stoxx 600 was down 0.53% to 341.02, alongside a 1.13% drop on the German Dax to 11,096.31, while the FTSE Mibtel was off by 0.29% at 17,164.33.
Stock in Lufthansa was lower despite a report on Reuters that the carrier was closing in on a €9bn state-rescue that would see Berlin take a 20% stake in the airlines group.
In parallel, front month Brent crude oil futures were 2.15% higher at $36.52 a barrel on the ICE, although euro/dollar was on its front foot, rising 0.13% to 1.0994.
To take note of, US oil inventory data released on Wednesday had revealed "faltering" demand for gasoline, said analysts at Capital Economics, although they expected producer countries' supply cuts to continue providing a floor for prices.
Manufacturing and services sector Purchasing Managers' Indices for the euro area delivered a small positive surprise.
IHS Markit's factory Purchasing Managers' Index jumped from an April reading of 33.4 to 39.5 (consensus: 36.4) while that for the tertiary sector improved from 12.0 to 28.7 (consensus: 26.0).
Reacting to the data, economists at Barclays Research said they could see "upside risk to our forecast due to stronger German and French momentum than anticipated."
Nevertheless, Barclays was still anticipating a quarterly annualised rate of contraction of 18.7% in Eurozone GDP growth for the second quarter.
For his part, Chris Williamson at IHS Markit was sticking with his forecast for a 9% drop in euro area GDP in 2020 and said that a full recovery would take "several years".
Meanwhile, in Spain, political tensions were laid bare overnight, amid conflicting reports around whether Spain's Socialists had inked a deal with far-left coalition partner Podemos and Basque radical left group, EH Bildu, to fully rescind the country's 2012 labour market reforms - at the most inopportune time possible, according to their critics.
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