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European Stocks Seen Largely Higher, Helped by Chinese Recovery

Stock MarketsSep 01, 2020 02:08AM ET
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By Peter Nurse - European stock markets are set to open largely higher Tuesday, helped by signs of economic recovery in China, but the U.K. could underperform after its markets were closed Monday.

At 2:05 AM ET (0605 GMT), the DAX futures contract in Germany traded 0.6% higher, helped by reports that the German government will revise up its forecasts for growth this year when it publishes updated forecasts later. The CAC 40 futures in France climbed 0.4%, while the FTSE 100 futures contract in the U.K. fell 0.6%. 

Helping the tone Tuesday was the news that China's factory activity expanded at the fastest pace in nearly a decade in August, suggesting that the world's second-biggest economy, and a major export market for Europe’s companies, could be seeing a durable recovery from the Covid-inspired downturn.

The Caixin/Markit Manufacturing Purchasing Managers' Index rose to 53.1 last month from July's 52.8, marking the sector's fourth consecutive month of growth and the fastest rate of expansion since January 2011.

“We maintain our baseline scenario that China's economy will undergo a V-shape recovery,” said analysts at BBVA (MC:BBVA), in a research note Tuesday, “that means, the GDP growth rate will steadily climb up to 5% in Q3 and 6% y/y in Q4, concluding 2020 with a full-year growth outturn of 2.2%.”

Economic data will also be in focus in Europe Tuesday, with manufacturing PMI data for the region, German unemployment numbers and eurozone inflation figures all scheduled.

On Wall Street Monday, the Dow Jones Industrial Average and the S&P 500 ended in the red on the last day of August, while the NASDAQ Compositerose solidly.

The S&P gained more than 7% for the month to notch its best August since 1986, while the Nasdaq posted gains of nearly 10%, in what is traditionally a weak month for stock performance.

In corporate news, Old Mutual (LON:OMU)reported Tuesday a net loss for the first half of the year, and the South Africa-based, financial-services company suspended its dividend payout due to the  pandemic.

Lagardere (PA:LAGA) could also be in the spotlight amid a potential legal battle with its two largest shareholders, French media conglomerate Vivendi (PA:VIV) and activist fund Amber Capital, over boardroom representation.

Oil prices pushed higher Tuesday, helped by weakness in the U.S. dollar which makes commodities priced in the greenback more attractive to overseas buyers.

The dollar hit its lowest in more than two years earlier Tuesday as investors continue to digest the previous week’s policy shift on inflation announced by the U.S. Federal Reserve.

Later Tuesday, investors will look to the American Petroleum Institute’s figures on U.S. oil supply, with inventories expected to continue to be reduced.

U.S. crude futures traded 1% higher at $43.02 a barrel, while the international benchmark Brent contract rose 1% to $45.74. 

Elsewhere, gold futures rose 0.8% to $1,994/oz, while EUR/USD traded 0.4% higher at 1.1989.

European Stocks Seen Largely Higher, Helped by Chinese Recovery

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