29 March 2021

European Stocks Rise, Nearing Record High Levels

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News shaping
the markets today

     

What’s happening: European stocks recorded gains on Friday to close the week near all-time highs.

What happened: Investors shrugged off concerns around rising covid-19 cases and renewed lockdown restrictions in the EU.

Optimism over a stimulus-driven rebound in the US economy boosted the global growth outlook.

Why it matters: European stocks started on a positive note on Friday, receiving a strong handover from markets in the Asia-Pacific region, where stocks recorded sharp gains led by Japan and China.

The surge in covid-19 infections and a slow rollout of vaccines in the Eurozone had kept equities on the backfoot for most of the week. However, markets turned bullish about the global economy, with support from the disbursement of America’s massive stimulus package.

Investor sentiment was not dampened even with EU leaders raising concerns about a shortage of AstraZeneca vaccine deliveries and the region facing a third wave of infections.

European stocks were also lifted by improving sentiment for US equities. US stocks ended their losing streak on Thursday, helped by a surge in cyclical stocks. Banking shares also traded higher after Federal Reserve chief Jerome Powell said that banks could resume their stock repurchases and increase dividend payments after June 30.

Markets were also buoyed by economic data. Retail sales in the UK recovered, with sales volumes rising 2.1% in February, in-line with expectations. Germany’s Ifo Institute business climate index climbed to 96.6 in March, from 92.7 in the previous month, exceeding market expectations.

The pan-European STOXX 600 gained 0.91% to close at 426.93 on Friday, just seven points short of a record high. The index added 0.85% from a week ago to notch gains for the fourth consecutive week. Mining stocks were among the top performing stocks, climbing over 4% on Friday. All sectors settled in positive territory.

With improving prospects of a strong economic rebound, shares of the world’s largest steelmaker, ArcelorMittal, rose around 7% on Friday, while Rio Tinto Group and BHP Group also recorded gains.

London’s FTSE 100 index also ended higher on Friday, supported by mining and oil shares. The blue-chip index rose 0.99% to close at 6,740.59, adding 0.48% from a week ago.

The German DAX 30 and French 40 indices rose 0.87% and 0.61%, respectively, on Friday.

What to watch: With no major economic data due for release from the Eurozone today, investors will continue monitoring the pace of the covid-19 vaccine rollout in the region.

Rising covid-19 cases remain one of the top concerns for markets, with total infections surging past 127 million globally.

The Markets Today

     

Crude oil will be in focus today, amid concerns over the fallout from the Suez Canal blockage.

Context: Prices for crude oil settled higher on Friday, as a massive cargo ship halted traffic at the Suez Canal for a fourth consecutive day.

Details: One of the world’s biggest container vessels had blocked the Suez Canal, which is a major passage for trade of several goods, including oil.

The giant container ship blocking the Suez Canal was finally refloated on Monday and is being secured, maritime services company Inchcape said in a Twitter post. But it remains unclear what the condition of the stranded ship is and when the canal would be open to traffic, with Inchcape saying that “more information will follow once they are known.”

On the other hand, traders remained concerned about renewed lockdowns in several parts of Europe to combat the further spread of the covid-19 pandemic, which is impacting the demand for energy products. These concerns had sent both the WTI and Brent into correction territory earlier last week.

Meanwhile, the EIA (Energy Information Administration) reported a fifth consecutive weekly increase in US crude stockpiles, while data from Baker Hughes, released on Friday, showed the number of active US oil rigs increasing by 6 to 324.

WTI crude for May delivery rose 4.1% to end at $60.97 per barrel on the NYMEX (New York Mercantile), following a 4.3% decline on Thursday. May Brent crude rose 4.2% to settle at $64.57 per barrel on ICE Futures Europe, after shedding 3.8% in the prior session.

What to watch: Markets will keep an eye on the traffic at the Suez Canal and resulting oil and gas price fluctuations

Goldman Sachs projects global demand to increase by 4.5 million bpd (barrels per day) into the third quarter. However, the figure is still 800,000 bpd lower than its earlier projections.

Other Markets: US indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.39%, 1.86% and 1.55%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

UK’s consumer credit, mortgage approvals and mortgage borrowing, South Africa's SACCI business confidence index, Brazil’s loan growth and Central Bank of Brazil’s focus market readout as well as the US Federal Reserve Bank of Dallas' general business activity index.

 

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