European shares bounce after four straight sessions of losses

(Reuters) – European shares surged on Wednesday after losing for four straight sessions, as a signs of a recovery in global manufacturing activity drove gains in chemical and industrial stocks.

The pan-European STOXX 600 index rose 1.4% after losing more than 2% over the past four sessions. The chemicals .SX4P and industrial goods .SXNP sectors added about 2.1% and 1.7%, respectively.

Positive manufacturing data from the euro zone, United States and China this week indicated that a recovery in the sector was under way.

A strong overnight close on Wall Street also helped as European technology stocks .SX8P mirrored gains in their U.S. peers. But weak inflation data and the lack of clear progress against the pandemic augured an uneven economic recovery, fears of which have kept the STOXX 600 in a tight trading range since June.

(Graphic: STOXX 600’s trading range, here)

“Weak inflation data may have increased the chances for the ECB to expand its efforts to stimulate the Euro-area economy,” Charalambos Pissouros, senior market analyst at JFD Group, wrote in a note, referring to the negative inflation reading from the euro zone on Tuesday.

“With central banks and governments around the globe staying willing to do whatever it takes to support their economies from the effects of the pandemic … we would still consider the latest retreat in most equity indices as a corrective phase.”

Data on Wednesday showed that German retail sales fell unexpectedly in July, indicating that household spending in Europe’s largest economy was still on the lam from the coronavirus. But German stocks .GDAXI rose more than 1%.

In corporate news, Barratt Developments Plc (BDEV.L), Britain’s biggest housebuilder, surged more than 5% after it flagged an improvement in forward sales, despite reporting a near 30% fall in annual housing completions and revenue.

Belgian real estate firm Aedifica (AOO.BR) jumped 6% after it clocked strong rental income growth over the 12 months to June 30, and flagged little impact to its results from the pandemic.

On the other hand, European banks .SX7P lagged their peers, retreating slightly as uncertainty over the pandemic seemed likely to create a shaky credit environment.

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