European stocks rebound as investors start on optimistic mood in May by Reuters

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© Reuters. FILE PHOTO: The screen shows the Nikkei stock average and stock indices outside of a Tokyo broker

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From Tommy Wilkes

LONDON (Reuters) – European stocks rose on Monday as investors looked optimistic about the global economic recovery. US economic data, which should underscore the strength of the recovery, had a busy week.

With China, Japan and the UK closed on public holidays, volumes were low and Asian stocks started slowly, with most markets falling into the red.

Investor optimism, fueled in the past two weeks by strong corporate earnings, continued into Europe into May.

The Euro STOXX Index rose 0.68% in early trading, while the German rose 0.7% and 40 0.61%.

Wall Street futures were higher, pointing to further gains after the stock markets made another round of record highs last week.

The MSCI World Equity Index, which tracks stocks in 49 countries, was flat on the day and below record highs as losses in Asia offset gains in Europe.

Investor enthusiasm for riskier assets is underpinned by a feeling that the global economy is about to boom as countries emerge from lockdowns and consumers and businesses release some of the excess savings they have built up over the past year.

German retail sales for March were far better than expected, reflecting that a US-led economic recovery is now gaining momentum elsewhere.

Recent company surveys have also shown that confidence in the recovery has risen sharply, although some economists believe businesses may stand before themselves and be more influenced by the success and speed of COVID-19 vaccination adoption.

“The data has been unrealistically strong over the past few months – while the underlying economy is doing very well, manufacturing growth is not quite at the stratospheric levels the polls imply,” said UBS economist Paul Donovan.

“The flow of news about the vaccination cycle may be more important in determining sentiment poll responses than actual economic activity.”

A busy week is expected to show clear strength for US economic data, particularly for the ISM manufacturing survey and April payroll. It is predicted that 978,000 jobs were created in the month as consumers spent their stimulus money and the economy opened up further.

For example, analysts at NatWest Markets see the US wage bill rose 1.25 million in April and unemployment fell from 6% in March to 5.2%.

Such gains could spark speculation about a reduction in asset purchases by the Federal Reserve, though Chairman Jerome Powell has shown all indications that policy will remain patient.

Powell will speak later Monday, and a number of Fed officials will follow this week. Dallas Fed President Robert Kaplan caused a stir on Friday when he called for talks to begin on rejuvenation.

Powell’s patience has helped contain selling pressure on government bonds, but 10-year yields ended last week up 6 basis points. They were last at 1.626% and thus slightly behind on the day.

The rise provided some support for the US dollar, which was under pressure from the rapid expansion of the US budget and trade deficits, a by-product of the economic outperformance.

The level stood at 91.218 and was at a two-month low of 90.422, although it ended in April with a 2% loss.

The euro rose 0.2% to $ 1.2040 after pulling back from a nine-week high of $ 1.2149 on Friday.

Cryptocurrency Ether hit a new record high of more than $ 3,000 as investors bet it will become increasingly useful in a future decentralized financial system. The lightning rally, which rose 325% in 2021, dwarfed that of bigger rival Bitcoin.

Oil prices were taken after ending up 6% to 8% last month. [O/R]

was last down 9 cents at $ 66.67 a barrel, while shedding 6 cents to $ 63.52 a barrel.

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