European stocks push higher on hopes of vaccine-led recovery despite lacklustre data

LaToya Harding
·3 min read
The sun rises behind the skyline of St Paul's Cathedral and the City of London, in London, Britain, August 2, 2020. REUTERS/John Sibley     TPX IMAGES OF THE DAY
London's benchmark index climbed higher despite a rallying pound, which hit a fresh milestone against the dollar on Friday, Photo: REUTERS/John Sibley

European stocks pushed higher on Friday after a subdued morning, with the FTSE 100 (^FTSE) closing 0.1% up after declining for a third consecutive day on Thursday.

The CAC (^FCHI) lead the way with a 0.96% jump, while the DAX (^GDAXI) rose 0.86%. New PMI data in continental Europe was mixed on Friday as the services readings in France and Germany showed a drop off in activity in February, while the manufacturing readings picked up.

The German manufacturing PMI update was 60.6, the fastest rate of expansion in three years. The UK’s manufacturing update nudged up. The services metric was 49.7, so it is still in contraction territory but it was a big improvement on the 39.5 registered in January, so that says a lot about the sector.

London's benchmark index climbed higher despite a rallying pound, which hit a fresh milestone against the dollar (GBPUSD=X) on Friday, reaching $1.40 for the first time since April 2018.

It also came as UK government borrowing jumped to £8.8bn (£12.3bn) last month, lower than economists had predicted but the first January deficit in a decade. The Office for National Statistics (ONS) said it was the highest borrowing figure for the month since 1993.

Additionally, UK retail sales fell sharply last month as a return to lockdown stopped people spending. Data from the Office for National Statistics (ONS), published on Friday, showed sales fell by -8.2% in January. Economists had forecast a -2.5% month-on-month decline.

ING economist James Smith said: "Assuming the spring reopening proves sustainable, and the vaccines succeed in keeping transmission and hospitalisations contained, then consumer spending is likely to rise strongly from spring onwards. However we think it's more likely to favour services for obvious reasons, and it's therefore likely that retailers won't feel the full benefit (though clothing may be a possible exception)

"The abrupt switch to online retail during the pandemic is also unlikely to fully reset, having only accelerated a trend that was already there. It's therefore likely that we'll see further signs of consolidation on the high street this year, and that may unfortunately contribute to a rise in unemployment in the sector."

READ MORE: UK retail sales collapse in lockdown

Across the pond, the S&P 500 (^GSPC) and Nasdaq (^IXIC) were both higher, up 0.33% and 0.73% as Europe came to a close. Technology stocks were leading the rally after the sector suffered the largest losses earlier in the week.

The Dow Jones (^DJI) also gained 0.44% after Treasury Secretary Janet Yellen said on Thursday a large COVID-19 relief package is still needed for a full economic recovery in the US.

She added that a $1.9trn (£1.36trn) stimulus deal could help the country return to full employment in a year.

“We think it’s very important to have a big package [that] addresses the pain this has caused – 15 million Americans behind on their rent, 24 million adults and 12 million children who don’t have enough to eat, small businesses failing,” Yellen told CNBC after the closing bell on Thursday.

“I think the price of doing too little is much higher than the price of doing something big. We think that the benefits will far outweigh the costs in the longer run,” she said.

Asian stock markets initially took their lead from Wall Street overnight, sliding lower after opening amid disappointing US jobs and economic data.

They later recovered some of the losses to close fairly mixed.

The Nikkei 225 (^N225) in Tokyo sank 0.72% while the Hang Seng (^HSI) in Hong Kong pushed 0.31% higher. The Shanghai Composite Index (000001.SS) also gained 0.57%.

WATCH: What UK government COVID-19 support is available?