European equities were on track to snap a four-day losing streak on Friday off the back of upbeat earnings from some of the region’s leading companies such as Barclays and Daimler.
The continent-wide Stoxx Europe 600 index was up 0.8 per cent by mid-morning, buoyed by financial stocks following forecast-beating earnings results from Barclays and Nordea banks. Europe’s banking sector, which has tumbled almost 40 per cent this year, was up more than 3 per cent in morning trade.
The Stoxx Europe 600 Automobiles & Parts was also higher, climbing 1.6 per cent, after Stuttgart’s Daimler raised its profit forecast, driven by a third-quarter jump in auto sales in China.
Data released this morning gave investors a mixed picture on the strength of Europe’s economic recovery. UK retail sales rose 1.5 per cent in September from the previous month, higher than the 0.4 per cent anticipated by analysts polled by Reuters.
But James Smith, developed markets economist at Dutch bank ING, warned that, as stricter lockdown measures came into force, “this remarkable progress may be beginning to run out of steam”.
In Germany, the latest composite purchasing managers’ index rose to 54.5, above the expected 53.2, driven by a rebound in manufacturing. A reading above 50 indicates expansion.
“We are seeing a recovery in the manufacturing sector and that’s leading the way,” said David Miller, investment director at Quilter Cheviot. Increased factory activity — which is much more global than the services sector — has been supported by the recovery in Asia, he added.
But in the services sector, PMIs for the eurozone and UK indicated slowing activity. “The two-speed nature of the pandemic economy is becoming increasingly clear,” said Hugh Gimber, global market strategist at JPMorgan Asset Management. The uneven recovery might push policymakers to approve further stimulus measures, which would be positive for risk assets, he added.
London’s FTSE 100 and Frankfurt’s Xetra Dax indices were up 1.5 per cent and 1.1 per cent, respectively.
Overnight, US President Donald Trump and challenger Joe Biden clashed over coronavirus in the final election debate, as infections rose in the country. Polling data pointing to a Democratic win of the White House and both houses of Congress — an outcome that has been labelled a “blue wave” — have supported markets in recent weeks, reducing fears that the election result might be disputed.
“Hopes are rising that a blue wave is coming, which will cause a new swell of fiscal spending that will boost profits and patch over any weak spot in the economy,” said analysts at BCA Research. But they added that this view could prove overly positive, since Democrats may not carry the Senate, which would make it harder to pass a large stimulus package.
Nevertheless, there was a “working assumption” among investors that further US fiscal stimulus measures would be approved after the election regardless of who wins, said Mr Miller. “That’s why markets haven’t reacted badly to a lack of one.”
Futures contracts tipped the benchmark S&P 500 to gain 0.2 per cent when Wall Street opens.
Equities in the Asia-Pacific region had a mixed session. Tokyo’s Topix rose 0.3 per cent, Hong Kong’s Hang Seng was up 0.5 per cent while China’s CSI 300 lost 1.3 per cent.