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Europe close: Stocks start August in good form, earnings in focus

By Alexander Bueso

Date: Monday 03 Aug 2020

Europe close: Stocks start August in good form, earnings in focus

(Sharecast News) - Stocks across the Continent snapped higher in the first trading session of August, bolstered by better-than-expected readings on manufacturing sector activity in Europe, China and the US.
Investors thus appeared to brush aside concerns regarding the mounting number of Covid-19 cases around the world.

They also appeared to look past reports at the weekend that Downing Street was looking at how to avoid the need for another full lockdown, but planning for the worst-case scenarios nevertheless - including a lockdown for London.

"It has been a solid day for European equities, and US markets are moving higher as well, helped along by better PMIs from China and the US. Earnings season has seen a healthy majority of companies beat forecasts, with the fears of Armageddon proved unfounded once more," said IG chief market analyt Chris Beauchamp.

"Now that big tech names are mostly out the way, the Nasdaq has found the strength to rally, and looks poised to continue its long-term rally having essentially struggled to make much headway for July."

The benchmark Stoxx 600 added 2.05% to 363.64, alongside a 2.71% advance for the German Dax to 12,646.98 while the FTSE Mibtel was up 1.51% at 19,379.79.

At the sector level, the Stoxx 600 sector gauge for Travel&Leisure fluctuated wildly, ending up 2.09%, having pared an early near 2% loss, while lenders' shares advanced 1.57% as a group.

Morgan Stanley analysts also weighed in with a positive take on earnings, highlighting to clients how half of firms in Europe which had reported thus far had beaten analysts' estimates, against 30% which had fallen short.

"European earnings revisions are currently hovering around neutral territory, having reached historic lows earlier in the year," they said.

"This being said we've yet to see any meaningful EPS upgrades just yet. Financials are still the only major sector group to see modest earnings upgrades at this time."

Euro/dollar meanwhile was off 0.2% at 1.1724 and front month Brent reversed finishing up 1.77% to $44.29, with the latter gaining despite reports that Russia had raised its oil output slightly.

IHS Markit's factory sector Purchasing Managers' Index for July was revised higher to 51.8, up from 47.4 in June (Preliminary: 51.1).

Despite the "very positive" start to the third quarter, IHS Markit's chief business economist, Chris Williamson, highlighted that the pace of job losses remained higher than at any time since 2009.

Williamson said: "The next few months numbers will therefore be all important in assessing whether the recent uplift in demand can be sustained, helping firms recover lost production and alleviating some of the need for further cost cutting going forward."

In Spain, June data showed that the volume of tourists fell by 97.7% against a year ago at 204,926 with their spending 98.6% lower.

On the other side of the world, survey compiler Caixin's China Purchasing Managers' Index printed at a more than nine-year high of 52.8 for July from 51.2 for June (consensus: 51.1).


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