Europe close: Stocks rally late in the session, technology paces gains

30 June 2020

(Sharecast News) - A late spurt of buying saw stock market gauges across the Continent recover to finish on a mixed note, helped by the release of some significantly better-than-expected readings on the economy in Europe and from overseas.
In the background, analysts appeared to be divided on the staying power of Monday's rally in stocks.

But for European issues at least, <em>Bank of America</em> sounded a confident note.

Its equity strategists reiterated their 'overweight' stance for shares in France, Italy and Spain, arguing that "even if the US suffers a setback, the European recovery is proceeding more smoothly."

"As a consequence, we expect the Euro area PMI to rise to 53 in August and 58 in September, in line with levels reached in past recoveries," they added.

By the end of trading, the benchmark Stoxx 600 was up 0.13% to 360.34, alongside a 0.64% advance for the German Dax to 12,310.93 while the Cac-40 had dipped 0.37% to 4,935.99.

Technology did well, mimicking gains overnight on the US Nasdaq Composite.

The Stoxx 600 sector gauge climbed 1.63% with shares of European chipmakers buoyed by confident revenue forecasts out of US peer Micron.

Dampening the mood a bit, in prepared remarks ahead of his testimony before a Congressional committee on Tuesday afternoon, the head of the US central bank stressed the need to "keep the virus in check".

Underscoring that view, a smattering of new novel coronavirus cases or outbreaks were reported overnight in Australia, Japan, South Korea and China.

However, the daily rates of new infections decreased in the US and, in Germany, outbreaks appeared to remain under control, with the so-called R-naught reproduction rate for Covid-19 only inching up from 0.71 for Monday to 0.74 on Tuesday.

Oil&amp;Gas shares on the other hand were a drag on the Stoxx 600 after Royal Dutch Shell lowered its long-term outlook for oil and gas prices and announced that it would write-down the value of its assets by as much as $22bn.

A bounce in Wirecard stock extended into its second day after its North American unit said it was pursuing a sale and Britain's CFA cleared its UK unit to resume operations.

In other news, German lender Commerzbank was reportedly mulling 7,000 job cuts while Airbus was said to be planning a restructuring.

On the economic side of things, France's INSEE reported a 36.6% month-on-month surge in household consumption for May (consensus: 30.0%).

That helped push the year-on-year rate of decline from April's dire -32.7% amid coronavirus lockdowns to -8.3%, although Pantheon Macroeconomics estimated that consumption might still fall by around 15.1% in the second quarter.

Meanwhile, in Spain, the country's national statistics office confirmed that GDP shrank at a 5.2% quarter-on-quarter clip during the second quarter, the worst ever contraction.

Overseas, China's 'official' factory sector Purchasing Managers' Index printed at 50.9 for June, against 50.5 in May (consensus: 50.6), despite the Covid-19 lockdowns that were put in place during the month in Beijing.