Europe: Stocks close near 2-week high as PMI data brings cheer

[BENGALURU] European shares closed at their highest in almost two weeks on Tuesday, powered by cyclical stocks, following signs that business activity in the continent was rebounding faster than expected from a coronavirus-driven slump.

The pan-European Stoxx 600 index ended 1.3 per cent higher, with economically sensitive sectors such as banks, automakers, miners and insurers gaining between 1.9 per cent and 3.3 per cent.

Euro zone stocks rose 1.6 per cent after IHS Markit's Purchasing Managers' Index (PMI) showed a historic coronavirus-induced downturn in the bloc had eased again in June as businesses reopened after weeks of lockdown.

The index recovered more than expected to 47.5 from May's 31.9, after touching a record low of 13.6 in April.

Germany's DAX jumped 2.1 per cent, France's CAC 40 rose 1.4 per cent and the UK's FTSE 100 rose 1.2 per cent after better-than-expected readings from Europe's largest economies.

"It would no longer surprise me if the data is a surprise on the upside," said Daniel McDonagh, head of European portfolio management team at Pyrford International, part of BMO Global Asset Management.

"The big question still is whether we can proceed on the exit strategy from the lockdown in a smooth manner and really avoid a step backwards."

Investors also took relief as White House trade adviser Peter Navarro walked back from his earlier remarks that the Phase One trade deal with China was "over" and US President Donald Trump confirmed in a tweet the trade deal was fully intact.

BlackRock's Investment Institute said it was "warming up" to European assets following what it called the eurozone's "impressive" efforts to tackle the coronavirus, and is considering an upgrade to European equities.

Trillions of dollars in stimulus from central banks and governments have helped the Stoxx 600 recover nearly 37 per cent from March lows, although the pace of recovery has slowed in June amid worries over a fresh rise in coronavirus cases.

Helping Germany's DAX outperform, Bayer AG gained 5.8 per cent after reports that the company is set to reach a settlement this week with US plaintiffs that claim its glyphosate-based weedkillers cause cancer.

German metals trader Kloeckner & Co jumped 17.5 per cent after it provided positive earnings outlook for the second quarter.

Payments company Wirecard, mired in an accounting scandal, bounced 18.8 per cent after shedding more than 140 per cent in the past three sessions.

UK-listed drugmaker Hikma Pharmaceuticals fell 5.6 per cent after a major shareholder sold most of its nearly 1 billion pound stake.


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