Chinese economic data fuels European stocks as they side-step US unrest

Edmund Heaphy
Finance and news reporter
Markets looked set to side-step any impact from the continued civil unrest in the US. (Andy Wong/AP Photo)

European stocks gained for a third consecutive day on Wednesday as strong data from China’s services sector fuelled investors’ hopes that the global economy will stage a strong recovery from the coronavirus crisis.

Markets looked set to side-step any impact from the continued civil unrest in the US, which saw largely peaceful protestors defy curfews across the country on Tuesday night.

A closely watched survey by IHS Markit found that China’s services sector’s purchasing managers’ index (PMI) reading came in at 55.0 in May, its highest since October 2010.

Similar data from the UK and eurozone pointed to a slowing pace of contraction in the month, even if they are some way off from returning to growth.

PMIs are an indicator of private sector activity and are given on a scale of 1 to 100. Anything above 50 signals growth, while anything below means contraction.

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The pan-European STOXX 600 index (^STOXX) rose by around 1.4%, while London’s FTSE 100 (^FTSE) was up by around 1.2%.

Germany’s DAX (^GDAXI) was up by around 2.3%, while France’s CAC 40 (^FCHI) was 2% in the green.

The PMI figure, up from 44.4 in April, is reflective of strong growth in domestic business in the services sector.

China’s SSE Composite Index (^SSEC) rose by less than 0.1% on Wednesday, while the Hang Seng (^HSI) was up by 1.2% in Hong Kong at market close.

Japan’s Nikkei (^N225) closed almost 1.3% in the green, reaching its highest level since late February.

The KOSPI Composite Index (^KOSPI) in South Korea was up by around 2.9%, while Australia’s ASX 200 (^AXJO) climbed by more than 1.8%.

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“Backlogs of work fell for the third month in a row, as the Chinese economy continued its recovery from its February lockdown,” said Michael Hewson, the chief markets analyst at CMC Markets UK.

“This positive spill-over looks set to continue here in Europe, as markets extrapolate out the improvements seen in the latest China data into the rest of the world.”

Futures were pointing to a positive open for US stocks on Wednesday.

S&P 500 futures (ES=F) rose by more than 0.4%, while Dow Jones Industrial Average futures (YM=F) rose by 0.6%. Nasdaq futures (NQ=F), meanwhile, were up by more than 0.3%.