Manufacturing rebound lifts European stocks

A modest expansion in euro zone manufacturing activity and hopes of fresh US stimulus lifted European stocks across the board on Monday, with carmakers, miners and construction firms leading the gains.

After a lukewarm trading session in the morning, the pan-European Stoxx 600 picked up momentum after a strong Wall Street start and closed 2.1 per cent higher.

Factory activity across the euro zone expanded, reflecting an improvement globally as China, Britain and the United States reported upbeat numbers. However, analysts were cautious about a sustained recovery amid concerns about a further tightening of restrictions in Europe as Covid-19 cases rose.

DUBLIN

Dublin's Iseq rose 2 per cent to 6,220 albeit trading volumes were weak on account of the bank holiday. Bank of Ireland and AIB both rose 4 per cent while Permanent TSB added 3 per cent as Europe's financials were boosted by a more positive outlook for the euro zone economy generally.

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Building materials group CRH and packaging firm Smurfit Kappa were also lifted by the positive maufacturing barometer, closing 4 per cent and 4.5 per cent higher respectively.

Swiss-Irish baked goods specialist Aryzta was also up at 54 cent amid heightened speculation it will be subject of a takeover bid in the coming days.

Paddy Power Betfair owner Flutter Entertainment climbed 2.6 per cent to €131 amid a resumption in sporting events and a better outlook for gaming firms generally. Ryanair was also up 3.4 per cent at €10.89.

LONDON

London's FTSE 100 posted its best session in seven weeks on Monday as an uptick in factory activity chimed with similar data from Germany and United States to raise economic recovery hopes, although HSBC's slide after results capped gains.

HSBC slid 2.9 per cent to its lowest since 2009 as the coronavirus crisis saw it flag mounting bad debt charges and miss profit expectations, sending the FTSE 100 to its lowest since mid-May, before sentiment turned. After marking its worst week since mid-June on Friday, the blue-chip index closed up 2.3 per cent.

“While the Asian business remained resilient with limited impact from the US-China tensions and global markets had a solid quarter, pressure on net interest margin intensified and the quarterly cost of risk increased further, driven by the economic impact of Covid-19,” analysts at Morningstar wrote of HSBC.

Data showed British manufacturing output last month grew at its fastest pace in nearly three years, while Germany reported an expansion for the first time since 2018. Earlier in the day, China – one of UK’s major trading partners – also reported growth in factory output. In the United States, a survey showed manufacturing activity accelerated to its highest level in nearly 18 months in July despite a resurgence in new Covid-19 cases.

Material stocks were the biggest boosts as iron ore prices rose, followed by the healthcare sector. AstraZeneca jumped 2.8 per cent. The domestically-focussed FTSE 250 rose 1.3 per cent, breaking a three-session losing streak.

EUROPE

Carmakers were the top gainers in Europe, up 3.8 per cent, after Ferrari trimmed its full-year earnings forecast but said its second quarter order book rose significantly versus a year ago.

The broad gains helped banking stocks shed early losses following a set of disappointing earnings. France’s Société Générale slipped 0.7 per cent as it reported a €1.26 billion quarterly loss.

NEW YORK

Wall Street’s main indices rose on Monday as a rebound in multibillion dollar deals, including Microsoft’s pursuit of TikTok’s US operations, lifted sentiment in the absence of a fiscal coronavirus relief Bill.

Microsoft jumped 4 per cent on saying it would push ahead with talks to acquire the US operations of Chinese-owned TikTok after US president Donald Trump reversed course on a planned ban of the short-video app.

Apple jumped for a second straight day following stunning quarterly results and announcing a four-for-one stock split. At its current price of about $437 a share, the tech giant is now about $132 billion – or about $30 a share – short of hitting $2 trillion in market capitalisation.

Tech far outpaced gains among the 11 S&P 500 sectors in morning trading. A rally in tech-related stocks and historic stimulus have lifted the S&P 500 to within 4 per cent of its peak, but faltering macroeconomic data and a gridlock on more government stimulus have made investors cautious again . – Additional reporting by Reuters.