European stocks positive following encouraging economic data

European stocks positive following encouraging economic data 981 980 Realm

European stocks are slightly higher this morning on indications of an economic recovery in China. Better than expected manufacturing PMI data in China showed factory activity expanded in June.



Global Macro

  • Britain’s gross domestic product shrank by 1.7% year-on-year in the first quarter of 2020, the biggest fall since the third quarter of 2009 and compared with a preliminary estimate of a 1.6% slump, due to a widespread disruption to economic activity due to the coronavirus pandemic and the government’s efforts to contain it since the second half of March. Household consumption dropped 2.5% (vs preliminary -1%) and fixed investment slumped 2.5% (vs preliminary -2.3%). In addition, government spending dropped 1.6% lower (vs preliminary -0.1%) while the negative contribution of net trade was revised downwards as exports and imports both fell sharply.
  • Business investment in the United Kingdom declined 0.3% on quarter in the first three months of 2020, worse than initial estimates of a flat reading and following a similar fall in the previous period, final estimates showed. It partially reflects the effects of the coronavirus pandemic on the economy due to a lockdown imposed from mid-March. Investment in other buildings and structures as well as transport equipment went down, though these were partially offset by increases in investment in information and communication technology equipment, and other machinery and equipment.
  • The annual inflation rate in the Euro Area is expected to pick up to 0.3% in June 2020 from a four-year low of 0.1% in the previous month and above market expectations of a 0.1% gain, a flash estimate showed. Main upward pressure should come from services (1.2% vs 1.3% in May), non-energy industrial goods (0.2%, the same as in May) and food, alcohol & tobacco (3.1% vs 3.4%). At the same time, energy prices are seen falling at a softer pace (-9.4% vs -11.9%). The annual core inflation, which excludes volatile prices of energy, food, alcohol & tobacco and at which the ECB looks in its policy decisions, is likely to ease to 0.8% from 0.9% in the prior month. On a monthly basis, consumer prices are expected to increase 0.3%, reversing a 0.1% decline in May.
  • On Tuesday: European stocks enjoyed their best quarter since March 2015, rising more than 12.6% since April 1st as investors cheered reopening efforts, stimulus measures from central banks and governments across the region and steps taken by EU to set up a recovery fund. On a negative note, concerns about a second wave of infections mounted. US stocks Extending the strong upward move seen in the previous session, stocks moved notably higher over the course of the trading day on Tuesday. The Dow saw some volatility before eventually joining the broader Nasdaq and S&P 500 firmly in positive territory. Asian stocks rose as economic optimism prevailed despite a spike in global coronavirus cases. Data showing that China’s manufacturing sector expanded more than expected in June bolstered sentiment.
  • Tuesday’s data below:

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