07 April 2021

European Stocks Surge to Record Highs

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News shaping
the markets today

     

What’s happening: European stocks recorded gains on Tuesday following the resumption of trading after the Easter holiday.

What happened: Investors shrugged off news of the slow pace of covid-19 vaccinations in the Eurozone and, instead focused on the prospects of an economic rebound.

Markets in Europe climbed to a record high on Tuesday more than one year after the covid-19 pandemic resulted in a stock market crash.

Why it matters: With European equity markets reopening after the long Easter weekend, stocks followed Wall Street’s rally on Monday on strong US jobs data pointing towards a sharp economic recovery.

The IMF raised its global growth outlook, projecting a 6% expansion in 2021, from its earlier forecast of 5.5% growth. Global GDP for 2022 is seen expanding by 4.4%, up from their previous estimate of 4.2%.

"Nonetheless, the outlook presents daunting challenges related to divergences in the speed of recovery both across and within countries and the potential for persistent economic damage from the crisis," IMF Chief Economist Gita Gopinath said.

The Stoxx Europe 600 climbed around 1% to 436.47 on Tuesday before settling higher by 0.7%, topping the peak level of 433.9 hit on February 19, 2020. Cyclical stocks, including miners and automakers, led the rally, with travel and leisure shares also trading higher.

The Stoxx’s surge comes after the S&P 500 climbed to an all-time high on Monday. Within Europe, Germany’s stock market had already recovered pandemic losses earlier this year, while the major stock indices of Greece and Spain continued to trade well below last year’s levels. The French 40 jumped on Tuesday to its strongest level since June 2007.

London shares have been on an uptrend, with domestically focused stocks trading sharply higher, after the UK reached a Brexit deal and announced a quicker rollout of covid-19 vaccines than the rest of the continent. London’s FTSE 250 has gained 7.4% so far this year, also on course to hit a record high.

UK’s FTSE 100 spiked 1.28% on Tuesday, while the German DAX 30 and French 40 added 0.70% and 0.47%, respectively.

What to watch: Investors await services and composite PMIs from the Eurozone. The IHS Markit Eurozone services PMI is expected to rise to 48.8 in March, from 45.7 in the prior month, while the composite PMI is projected to improve to 52.5, from February’s reading of 48.8.

Markets will continue to monitor the covid-19 vaccine rollout in various European nations, following an improvement in supplies. Analysts at JPMorgan Chase project European stocks to outperform their US counterparts this year.

The Markets Today

     

The Canadian dollar will be in focus today, ahead of a basket of economic reports.

Context: The CAD/USD traded lower on Tuesday, with the Canadian dollar retreating from a two-week high.

Details: Upbeat economic reports from the US and China supported crude oil, one of Canada's major exports. Crude prices recorded gains on Tuesday, recovering some losses from the previous session. WTI crude rose 1.2% to settle at $59.33 per barrel on Tuesday.

The US dollar stabilised slightly versus a basket of major currencies after recording a loss on Monday, with the greenback receiving some support from rising optimism around a rebound in the American economy.

Some experts expect the Bank of Canada to lower its bond purchases at its upcoming rate meeting on April 21. Its peers, including the US Federal Reserve and Europe’s ECB have announced plans to hold or even raise their bond-buying pace.

The CAD/USD settled lower at 1.2574 on Tuesday. On Monday, the loonie had hit its highest intraday level since March 22 of 1.2497.

Canadian government bond yields traded lower on Tuesday, with 10-year yields shedding 3.4 basis points to reach 1.521%.

What to watch: Investors await several economic reports from Canada, including balance of trade, exports, imports, and the Ivey PMI. Canada is expected to record a trade surplus of C$1 billion in February, versus a C$1.4 billion surplus in January. The Ivey PMI for Canada is expected to rise slightly to 60.5 in March, from 60 in the previous month.

Rising covid-19 cases remain one of the top concerns for markets, with global infections surging past 132.2 million.

Other Markets: US indices closed lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.29%, 0.10% and 0.14%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

South Africa’s IHS Markit PMI, Spain’s services PMI, Italy’s services PMI and composite PMI, France’s services PMI and composite PMI, Germany’s services PMI and composite PMI, China's foreign exchange reserves, UK’s services PMI and composite PMI, Mexico’s gross fixed investment, Brazil’s car production and new vehicle registrations, Turkey’s treasury cash balance as well as the US MBA mortgage applications, balance of trade, exports, imports, EIA’s crude oil inventories, FOMC minutes, consumer credit and the IMF/World Bank Spring Meetings.

 

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