Global markets edge up on good China and European data
European equity volatility is at its lowest in 15 months and Asian shares open marginally higher
London — Stock markets edged higher on Tuesday as reassuring data about the health of China’s economy helped investors shrug off disappointing bank earnings in the US, while volatility in European markets took another leg lower.
European shares followed their Asian counterparts and opened marginally higher, leaving the Euro STOXX 600 within a whisker of eight-month highs. Germany’s DAX 30 gained 0.5%, while Britain’s FTSE 100 also strengthened.
The recent rally comes as a degree of calm has descended across financial markets, with European stock volatility falling to its lowest since January 2018, exacerbated by a shortened trading week for the Easter holidays.
Natixis cross asset strategist Florent Pochon said investors were mainly focused on US earnings, especially after the first flurry of bank results made for mixed reading.
“After the strong rally we have seen in equities, people are now waiting for the next catalyst,” Pochan said. “We do expect some more positive data from Europe which should give a bit of fresh air [to European assets].”
The US-China trade dispute, signs of slowing global corporate earnings and weaker business investment have all put pressure on riskier assets in the past year, but investors have been quick to seize on positive news.
All eyes are now on Chinese quarterly GDP data due on Wednesday. After a worrying start to the year, Chinese data has been more positive as authorities ramped up stimulus measures, soothing investor fears about a slowdown in the world’s second-biggest economy.
The MSCI world equity index, which tracks shares in 47 countries, edged up 0.1% in early European trade.
Turkey’s lira recovered slightly after closing at its weakest level since October on Monday. The Turkish currency was hit by data showing a surge in unemployment, a higher-than-expected budget deficit and tensions with the US.
Turkey’s finance minister said on Monday that he had held productive meetings in Washington with international financial institutions, but they failed to much lift the currency. By 8am GMT, the lira had firmed 0.2% to about 5.79 lira per dollar.
After a rally to five-month highs this month, crude oil paused on the prospect of Russia and oil cartel Opec boosting production to fight for market share with the US. US West Texas Intermediate (WTI) was flat at $63.46 a barrel after losing nearly 0.8% the previous day.
Oil has been surging on tightening global supplies, as output has fallen in Iran and Venezuela amid signs the US will toughen sanctions on those two Opec producers, and on the threat that renewed fighting could stop production in Libya.
Currency markets were generally quiet, although the Australian dollar took a dive lower after the Reserve Bank of Australia signaled in policy minutes that an interest rate cut would be appropriate should inflation stay low and unemployment trend higher. The Aussie shed 0.4% to $0.7140.
The dollar was unchanged, its index at 96.908, while the euro and yen both rose slightly.
Many investors are now waiting on Chinese GDP. A Reuters poll forecast first-quarter growth to have cooled to 6.3%, the weakest pace in at least 27 years, but a flurry of measures to boost domestic demand may have put a floor under slowing activity in March.
“The outlook for Asia critically hinges on the outlook of China’s growth and the ongoing US-China trade talks,” wrote strategists at Bank of America Merrill Lynch. “On both fronts, policy makers and investors believe that the outcome of these two issues is turning more positive.”