By Geoffrey Smith
Investing.com -- Europe’s stock markets are heading higher as surveys of the services sector in China and elsewhere raised hopes that the global economy is pulling out of the slowdown that began towards the end of 2018.
News of a possible breakthrough in the Brexit process also supported sentiment, although the boost to the pound ensured that the FTSE 100 lagged its peers, gaining only 0.1% as of 04:15 AM ET (0815 GMT).
The benchmark Euro Stoxx 600 was up 2.46 points, or 0.6% at 387.48, while the trade-sensitive German Dax led the way with a 1.2% gain.
Asian markets had rallied overnight after the Caixin Services Purchasing Managers’ Index rose to its highest level in 14 months. The mood was further improved by a Financial Times report suggesting that a trade deal between the U.S. and China is close (although the newspaper’s sources noted that the last 10% of any trade negotiation are the hardest).
The big question of the day was therefore whether European services PMIs would make up for the shocking readings from manufacturing last week.
They did: the Eurozone services PMI rose to 53.3 from 52.7 in March, beating expectations for an unchanged reading. The improvement was sharpest in Italy, which has been under a cloud this week after the OECD slashed its growth forecast for the year and issued a dire warning about its debt trajectory. But readings also improved in Germany and France, even if the latter wasn’t enough to bring the composite French PMI above the 50 line that would represent growth.
China-sensitive auto and supplier stocks appear to be getting the most uplift from the data, with French suppliers Faurecia (PA:EPED) and Valeo (PA:VLOF) leading the CAC 40. German rivals Hella (DE:HLE) and Continental (DE:CONG) are likewise outperforming the big local auto brands.
Banks stocks - especially in Spain - are also picking up as the outlook for the economy brightens a bit. Santander (MC:SAN) is up 1.7%, after unveiling another 1.2 billion euros of planned cost cuts. The bank is under pressure to move on from an embarrassing aborted attempt to hire UBS investment bank chief Andrea Orcel as CEO.