Europe’s main stock markets rose yesterday on better-than-expected eurozone and Chinese economic data, although gains were capped by weak German sentiment and lingering fears of a return to recession.
London’s FTSE 100 index of leading shares rose 0.67 per cent to 5,129.42 points, while in Paris the CAC 40 rose 1.08 per cent to 3,084.37 points, and in Frankfurt the DAX added 1.07 per cent to 5,532.38 points.
“European markets have pushed up today on slightly better-than-expected data out of China, and some mixed data out of Europe,” said CMC Markets analyst Michael Hewson.
“However, the rally doesn’t really seem that convincing and as the day has progressed stocks have fallen back from their highs, as US economic data continue to disappoint,” he added.
Elsewhere in Europe, Amsterdam rose 0.71 per cent while Swiss stocks climbed 1.68 per cent. Brussels slipped 0.06 per cent, Lisbon ended down 0.16 per cent, Madrid was off 0.17 per cent and Milan fell 1.04 per cent.
Investors took their cue from the release of purchasing managers’ index (PMI) data for August, which pointed to signs of strength in the economies of the eurozone and China.
The eurozone’s PMI, compiled by London-based researchers Markit, held steady at 51.1, faring better than analysts had expected. HSBC’s preliminary PMI for China rose to 49.8 in August from 49.3 in July, a slight pick-up which suggested that China’s export-driven economy was doing better than expected despite global economic jitters.
However, Germany’s closely-watched ZEW economic expect-ations index failed to inspire confidence, falling a whopping 22.5 points to stand at minus 37.6 points, far below the indicator’s historical average of 26.2 points. In July, it had slipped by just 6.1 points.
Analysts said that the market’s positive sentiment could quickly reverse direction, noting that investors had again piled into safe-haven gold amid worries for the global economy, sending the precious metal above $1,900 an ounce for the first time.
“With gold breaching the $1,900-level it appears that equity markets have not yet won back the confid-ence of most investors, and volumes remain anaemic,” said Spreadex trader Christopher Purdy.
Equities markets across the globe have slumped for the past four weeks amid fears of a new economic slowdown in the United States and fallout from Europe’s sovereign debt crisis.
European equities were supported in the stretch by a strong opening on Wall Street. “Upbeat economic data from China and Europe have given the bulls something tangible to celebrate this Tuesday (yesterday) morning,” said Sarah Wasserman, an analyst with Schaeffer’s Investment Research.
Approaching midday US stocks had extended their gains, and the Dow Jones Industrial Average was up 2.01 per cent to 11,073.30 points.
The broader S&P 500 rose 2.15 per cent to 1,147.97 points, while the tech-heavy Nasdaq Composite gained 2.57 per cent to stand at 2,405.70 points.
Investors shrugged off data released yesterday that showed that the collapsed US housing market, a pillar of the world’s largest economy, is still struggling to recover. New-home sales fell 0.7 per cent in July, the third straight month of decline, the US Commerce Department said.
Asian stock markets closed higher yesterday, thanks to bargain hunting and a positive overnight lead from Wall Street, while Japanese shares were supported by a stable yen-dollar, traders said.
In Europe, Switzerland’s biggest bank UBS yesterday announced plans to slash 3,500 jobs to save some SFr 2.0 billion (€1.8 billion). In reaction, UBS shares won 2.09 per cent to 10.75 Swiss francs.