European equity markets largely tracked their Asian counterparts higher on Tuesday after upbeat Chinese trade data fuelled optimism that its economy was bouncing back.
The Stoxx Europe 600 was up 0.8 per cent in mid-morning trade, with gains of 1.1 per cent and 0.2 per cent respectively for Frankfurt’s Dax 30 and Paris’s CAC 40. London’s FTSE 100 was the only major index to trade lower.
The moves came after data showed that Chinese exports fell in March by much less than analysts had anticipated as the country ended lockdowns aimed at combating the coronavirus. China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks closed up 1.9 per cent.
“While the data has not always proven reliable, it suggests that the Chinese economy is starting to stabilise faster than expected,” said Sebastien Galy, senior macro strategist at Nordea Asset Management.
However, various analysts warned the respite would be “shortlived”, with a collapse in demand from abroad offsetting the easing of supply side constraints. Analysts at Barclays predicted a 20-30 per cent contraction in Chinese exports in the second quarter — compared with 13 per cent in the first — driven by “an expected growth slump in the country's major trading partners”.
In London, the FTSE 100 bucked the positive trend, giving up gains to sink 0.4 per cent as trading restarted following the Easter break after the government indicated there were no immediate plans to ease lockdown measures in the UK.
Meanwhile, investors were looking ahead to US earnings reports on Tuesday and during the week for a further glimpse into the impact of the pandemic on the global economy. A number of large banks and financial companies including JPMorgan and Bank of America are scheduled to report first-quarter earnings on Tuesday.
Futures trade tipped the S&P 500 to rise 1.4 per cent when Wall Street opens. Optimism that the pace of the virus’s spread is close to peaking plus fiscal and monetary intervention have driven a rally in US stocks in recent weeks.
The S&P has recovered much of its losses since plunging in late February and early March, leaving it 18 per cent off its all-time highs.
“It is remarkable that the US is in the midst of its greatest economic crisis in nearly a century and unprecedented societal disruption while the stock market trades at the same level as it did in June 2019, just 10 months ago,” analysts at Goldman Sachs said.
Markets are pricing in a sharp economic recovery following the sweeping intervention by the Federal Reserve — notably a $2.3tn liquidity injection. But some analysts are sceptical this will be a sufficient in the long run.
“Staggering as this all is, it arguably isn’t enough,” said analysts at Rabobank. “If we were to see a second virus wave later in the year then $2.3tn is far too small a sum to save everyone.”
Oil prices gave up earlier gains as concerns lingered over whether a record US-backed Opec deal to cut supply would be enough to absorb the global crude glut. Brent crude, the international benchmark, fell 0.7 per cent to $31.46 a barrel while US marker West Texas Intermediate was down 1.7 per cent at $22.03.
The yield on 10-year US Treasuries was little changed at 0.755 per cent.
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April 14, 2020 at 04:56PM
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Asia stocks rise as Chinese trade data boost sentiment - Financial Times
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