Europe close: Banks pace gains as stocks move back towards five-month highs
By Alexander Bueso
Date: Monday 06 Jul 2020
(Sharecast News) - Shares in Europe moved back towards roughly five-month highs, boosted by an overnight surge in Chinese stocks and another big positive economic surprise in the States.
Analysts' assessment of the outlook however appeared to be somewhat mixed.
For his part, Sentix's Manfred Hubner pointed out how investors' expectations were drifting lower in nearly all regions of the world.
Chris Beauchamp at IG on the other hand said: "Much of course hinges on earnings season, and after such a huge run-up markets are probably due a pause, but even this may just be a pause for breath before the rally takes off again in September or October."
The benchmark Stoxx 600 ended 1.58% higher at 371.21, led by gains for lenders' shares, which climbed 3.89% as a group.
The German Dax meanwhile put on 1.64% to 12,733.45 and was trading near its best level for five months, even as the euro added 0.6% against the US dollar to 1.1315, while the Ibex 35 rose 2.06% to 7,556.20.
In the background, overnight the Shanghai Stock Exchange's composite index shot up by 5.71%, a move that some attributed to an article in the Chinese Securities Journal arguing in favour of a 'bull' market in stocks to support the economy's digitalisation.
Stateside meanwhile, the closely-followed ISM services Purchasing Managers Index printed well ahead of forecasts for July.
Brent was also on the up, rising 1.1% to $43.26 a barrel on the ICE after Saudi raised the price for all its benchmark grades by $1.
UK property developers and homebuilders topped the Stoxx 600 leaderboard with investors cheering a far-stronger-than-expected on IHS Markit's construction sector Purchasing Managers' Index for June which printed at 55.3.
Commerzbank topped gains among European banks after the German lender's chief executive ad chairman tender their resignations.
On a related note, at the weekend, Morgan Stanley's Graham Secker said that confirmation, over the next month, that the European Union's recovery fund was set to go ahead "should drive a substantial re-rating of European risk assets, including higher valuations for European equities."
The investment bank's top picks in Eurozone banking were BNP and Unicredit, but they also liked stocks with "operational resilience" including Santander, RBS, KBC, Credit Suisse and Julius Baer.
Stock in Air France-KLM was little changed even after it unveiled plans to cut the size of its workforce by 7,500 over the next three years.
Monday's main economic releases were a tad mixed.
On the positive side of the ledger, euro area retail sales volumes bounded ahead by 17.8% month-on-month in May (consensus: 8.0%), but German factory orders bounced by only 10.4% (consensus: 15.4%).
Nonetheless, driving the latter was a 20.3% bounce in orders for capital goods, a good lead indicator for future investment demand, and many countries on the Continent were still in lockdown at the start of May so, according to some analysts, the figures might yet improve somewhat more.
Spanish industrial production meanwhile rebounded at a 14.7% month-on-month pace in May and although it remained 24.5% below its year earlier level, that was better than April reading of -33.6%.
Meanwhile, the Sentix institute's investor confidence gauge improved from June's -24.8 to -18.2.
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