21 May 2021

European Markets Rise Despite Inflation Concerns


News shaping
the markets today


What’s happening: European stocks traded higher on Thursday, after a sharp selloff in the previous session.

What happened: Investors brushed off inflation concerns, following upbeat earnings results from some companies and M&A talks in the chip sector.

Despite notching strong gains in Thursday’s session, the pan-European STOXX 600 index is on track to record weekly losses.

Why it matters: A surge in economy-related cyclical shares amid the easing of restrictions and strong earnings reports by various companies had sent the European index to a record high earlier this month. However, concerns around higher inflation resulted in heightened market volatility during the week.

During Thursday’s session, market sentiment was supported by news of EU nations agreeing to ease travel restrictions for non-EU travellers.

Investors shrugged off inflation data released by Germany, which showed that the largest economy of Europe is facing heightened inflationary pressure due to severe supply constraints. Germany’s producer prices recorded their highest rise in around a decade.

Several companies released their earnings results on Thursday. Shares of Deutsche Telekom gained 2.5% after the company lifted its medium-term core earnings forecast. French conglomerate Bouygues posted lower-than-expected core losses for its first quarter and boosted its full-year forecast for the telecoms unit.

Shares of Oslo-listed chipmaker Nordic Semiconductor climbed more than 11% to the top of the European index after reports of STMicroelectronics considering a bid to acquire the company.

The STOXX 600 index added 1.2% on Thursday, after recording a 1.5% loss in the previous session. Technology shares spiked by around 2.6%, with almost all sectors closing in positive territory.

The German DAX 30 index gained 1.7% on Thursday, while the French 40 added 1.3%. London’s FTSE 100 rose by 1%.

US stocks also moved higher on Thursday after declining for three sessions, driven by a surge in tech shares after the Labor Department reported the lowest weekly initial jobless claims since the beginning of the covid-led recession.

What to watch: Investors await data on PMIs and consumer confidence from the Eurozone. The IHS Markit Eurozone manufacturing PMI is expected to decline slightly to 62.5 in May, from 62.9 in April, while the services index is projected to rise to 52.3, from the previous month’s 50.5. Consumer confidence is widely expected to improve to -6.8 in May, from -8.1 in April.

The Markets Today


The Canadian dollar will be in focus today, ahead of economic reports from the region.

Context: The CAD/USD forex pair headed north on Thursday, mainly due to broad-based weakness in the US dollar.

Details: Although the US dollar recorded losses on Thursday, it remained above the three-month lows hit in the previous session following the release of minutes from the Federal Reserve’s recent meeting.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell 0.4% to 89.81 on Thursday.

Prices of base and other precious metals rose on Thursday. However, the price of crude oil, one of Canada’s major export products, tumbled more than 2%, after diplomats noted progress in the lifting of sanctions on Iran, which is expected to increase supply in the coming months.

On the economic data front, payroll services provider ADP said Canada added 351,300 jobs in April, notching gains for the third consecutive month. Prices of new homes rose by 1.9% in April, after rising 1.1% in March.

The CAD/USD forex pair traded higher to settle at 1.2061 on Thursday. The Canadian dollar had hit its highest level in six years versus the greenback on Tuesday, driven by rising commodity prices.

What to watch: Traders await wholesale and retail sales data from Canada. On the wholesale front, sales are projected to grow by 2.1% in April. Retail sales, which surged 4.8% in February, are expected to rise 2.3% in March.

Rising covid-19 cases in some parts of the world, including India and Singapore, remain one of the top concerns for markets, with total global infections topping 165.2 million.

The CAD/USD forex pair declined to 1.2082 this morning, with traders taking profit following the Canadian dollar’s rally.

Other Markets: US indices closed higher on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.55%, 1.06% and 1.94%, respectively.

Support & Resistances
for Today


market snapshot


Futures at 0400 (GMT)

What else to watch today


UK’s retail sales, manufacturing PMI, services PMI and composite PMI, Turkey’s consumer confidence index, France’s manufacturing PMI, services PMI and composite PMI, Germany’s manufacturing PMI, services PMI and composite PMI, Italy's industrial sales, Mexico’s retail Sales, India’s value of deposits, foreign exchange reserves and value of loans, as well as America’s existing home sales and Baker Hughes crude oil rigs.

ADS Securities London Limited “ADSS” is an execution-only service provider. This material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or investment objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by ADSS that any particular investment, security, transaction or investment strategy is suitable for any specific person. To the extent that any content in this material is construed as investment research, you must note and accept that the content was not prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.  This material may contain links to third party websites, and any content, or use of your personal data by any third party websites is not the responsibility of ADSS or any member of the ADSS Group.