01 June 2021

European Stocks in Uptrend for 4th Straight Month


News shaping
the markets today


What’s happening: European stocks closed lower on Monday, retreating from record highs earlier in the session.

What happened: Markets saw subdued trading due to holidays in major markets like the UK and US.

However, optimism around a strong economic rebound resulted in the pan-European STOXX 600 index recording gains for the fourth consecutive month in May.

Why it matters: Markets in the UK were closed due to a bank holiday, while US markets were closed for the Memorial Day weekend, keeping trading volumes lower on Monday.

Investor concerns grew during the course of the day, as various European countries published inflation data. Spain reported its highest inflation rate in four years, at 2.4%, in May. Inflation in Germany also rose to 2.5% in the month.

“With headline inflation on the rise, the ECB’s attempt to avoid the taper conversation will become more and more complicated,” said ING analyst Carsten Brzeski.

Meanwhile, France opened covid-19 vaccinations for people above the age of 18 years from Monday.

European stocks came under pressure following some weakness in Asian equities after China reported a slowdown in growth in the manufacturing sector amid rising commodity prices.

However, the OECD’s (Organisation for Economic Co-operation and Development) recent economic outlook of 5.8% GDP growth for the global economy in 2021, versus a 3.5% contraction in the previous year, brought some positive news for the markets. The organisation also projected the G20 group of developed economies growing by 6.3% in 2021, with 4.3% growth for the EU economy.

Despite strong signs for an economic rebound, the organisation warned of headwinds due to the shortage of covid-19 vaccines in the developing nations.

The STOXX 600 index closed lower by 0.5% on Monday, but still recorded around 2% gains for May despite inflation concerns, as economies started to reopen after covid-led lockdowns.

The French 40 declined around 0.6%. The German DAX 30 shed 0.6%, falling from a record high last week. The index came under pressure with a sharp decline in Deutsche Bank’s stock after reports of the US Federal Reserve expressing concern around the bank’s anti-money laundering practices.

What to watch: Investors await economic reports on manufacturing PMI, inflation and unemployment from the Eurozone. The IHS Markit manufacturing PMI is expected to decline slightly to 62.8 in May, from the previous month's record reading of 62.9. The inflation rate is expected to accelerate to 1.9% in May, from 1.6% in April. Analysts expect the unemployment rate to remain unchanged at 8.1% in April.

Covid-19 remains one of the top concerns for investors, with total global infections surging past 170.5 million.

The Markets Today


Bitcoin will be in focus today, after recording sharp losses for the month of May.

Context: Bitcoin, the largest cryptocurrency by market capitalisation, traded higher on Monday, but still ended the month with a decline of around 35%.

Details: Bitcoin prices had jumped to a record high of over $63,500 in April, after various US companies announced plans to invest in the cryptocurrency. MicroStrategy made an investment of over $2.2 billion in bitcoin, with Tesla investing around $1.5 billion.

Bitcoin came under pressure last month with rising concerns around the cryptocurrency facing increased regulatory pressure from the US and other countries. The crypto king faces significant headwinds from central banks planning to launch their own digital currencies.

Federal Reserve Chairman Jerome Powell said the central bank intends to create its own digital currency and is considering ways to increase scrutiny of cryptocurrencies. Regulators in China also announced measures to limit the use of cryptos and warned of a crackdown on bitcoin mining.

Bitcoin also suffered a setback after Tesla reversed its policy of accepting the cryptocurrency as payment, citing environmental concerns.

May’s 35% decline marks the steepest downturn in bitcoin prices since the 40% plunge recorded in September 2011.

Ethereum, the second-largest cryptocurrency, fell more than 10% in May, recording the first monthly loss since September 2020.

What to watch: Markets could witness some bitcoin purchases by big investors after the steep decline in prices. Such activity could restore confidence in the cryptocurrency. Traders will continue to monitor regulatory developments, which is likely to be the most significant impact on cryptocurrency prices in the near term.

Other Markets: US indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.19%, 0.08% and 0.21%, respectively.

Support & Resistances
for Today


market snapshot


Futures at 0400 (GMT)

What else to watch today


Russia’s manufacturing PMI and money supply M2, UK’s Nationwide house price index and manufacturing PMI, Spain’s foreign tourist arrivals, vehicle sales and manufacturing PMI, Turkey’s manufacturing PMI, Italy’s manufacturing PMI, unemployment rate and gross domestic product, France’s manufacturing PMI and new car registrations, Germany’s manufacturing PMI, unemployment rate and unemployment change, South Africa's Absa manufacturing PMI, unemployment rate, number of unemployed persons and vehicle sales, Mexico’s manufacturing confidence index, manufacturing PMI and foreign exchange reserves, Brazil’s GDP, balance of trade and manufacturing PMI, India's balance of trade, Canada’s GDP growth rate and manufacturing PMI as well as America’s manufacturing PMI, construction spending, ISM manufacturing PMI, IBD/TIPP economic optimism index and Dallas Fed manufacturing index.


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