Europe close: Stocks finish higher on the back of Chinese rate cut
By Alexander Bueso
Date: Friday 20 May 2022
(Sharecast News) - European shares were slightly higher at the end of the week, as Chinese central bank stimulus boosted sentiment after the previous session's heavy sell-off.
Continued selling pressure on Wall Street however dampened investor sentiment again.
"Although very much a lone voice crying in the wilderness, the PBoC's move provided the fundamental basis for a rally in risk assets, reversing some of the mid-week gloom," said IG chief market analyst Chris Beauchamp.
"But the surge in German factory-gate prices and a slump in UK consumer confidence shows that the broader backdrop continues to be quite negative for equities. With US markets already shedding initial gains, the picture remains uncertain."
The pan-European Stoxx 600 index was up almost 0.73% at 431.10 with all major bourses higher. Britain's mining-heavy FTSE 100 outperformed with a 1.2% rise.
Helping to boost sentiment, China's central bank cut its five-year loan prime rate by a more-than-expected 15 basis points, which gave some cheer to investors.
In other economic news however, producer prices in Germany recorded a record 33.5% year-on-year rise in April as the Ukraine war pushed up energy costs.
Consultancy GfK's UK consumer confidence index meanwhile fell from a reading of -38.0 for April to -40.0 in May (consensus: -39.0).
"Looking ahead, a recession will be avoided only if households borrow more or reduce their saving rate substantially in the second half of this year, given the severity of the squeeze on real disposable incomes," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
"On the face of it, the record low level of GfK's composite index of confidence in May suggests that households will be very cautious."
In equity news, luxury goods maker Richemont slumped 13%, after the company said discussions about its "Luxury New Retail" partnership are "taking time".
Shares in online cosmetics seller THG soared 25% as property developer Nick Candy said he was is considering making an offer to buy the firm, formerly known as The Hut Group.
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