European Stocks Lifted, US Equity Futures Point Lower

06 Jul 2021 · 3rd Party Analysis

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WRITTEN BY ThorFX

In Summary

  • European shares receive a boost by positive eurozone economic data
  • US traders return to the markets after an extended 4th of July weekend

Markets across Europe closed higher on Monday as a business activity is returning to the region. The broad European market ended its third straight day in the green on strong data which suggested the bloc’s economy grew at its fastest pace in over a decade.

The pan-continental Stoxx Europe 600 index climbed 1.55 points, or 0.34%, to 458.36. Strong services PMIs (purchasing managers’ index) showed eurozone businesses expanded their activity in June at a speed unseen in the last 15 years. The overall reading for the services sector in the eurozone was lifted to 58.3, its highest level since July 2007.

All major European bourses received a push higher on Monday despite mounting inflationary pressures and concerns over the Delta variant. Economically sensitive stocks tied to the ongoing reopening were among the biggest winners during yesterday’s positive session.

Banks, travel-and-leisure shares, and material stocks led the gains. Trading volumes, however, were lighter because of the Independence Day public holiday in the US, which closed Wall Street activities. The broader Stoxx 600 benchmark is still hovering below its mid-June all-time high as market participants are wary of a new wave of travel and business restrictions because of the recent spike in Delta variant infections in some places around Europe.

Inflation Expectations Mark Economic Growth

The other significant issue overshadowing the speed of the economic expansion is inflation expectations. After the European Central Bank reiterated last month it will keep its monetary policy unchanged, ECB President Christine Lagarde said on Friday the European economy was on track to rebound from the pandemic but recovery remained relatively fragile and uneven across EU member states. Inflation, according to Ms. Lagarde and several other policymakers, would be transitory.

France’s Health Minister Olivier Veran advised against complacency with the Delta variant and warned that the country could enter a fourth wave of the pandemic. On Monday, the French CAC40 lost about half a percent during its trading session but pared the losses and ended the day up 0.22%.

London’s FTSE100 hit a two-week high as Prime Minister Boris Johnson announced almost all remaining coronavirus restrictions in England will be lifted on July 19. The decision came despite warnings from health experts that Delta strain could reverse the progress if the nation abandons protective measures against the rapidly spreading and highly infectious virus. Final confirmation on ending restrictions should arrive on July 12.

In the US, investors are returning to the markets today after the extended 4th of July weekend. Futures tied to the major averages in pre-market trading are mainly tilted to the downside. Nasdaq futures indicate a lower open by roughly 0.1%, while S&P futures float unchanged. Dow futures are moderately in the green.

Meanwhile, the cryptocurrency market remained dormant throughout Monday trading. Bitcoin slid a little over 4% and ended its two-day winning stretch closing at $33,810. Ether was also pressured as price skittered down 5.7%, finishing at $2,215. Barclays yesterday announced it will no longer allow UK customers to transfer funds to Binance. The move came after the Financial Conduct Authority last month said the cryptocurrency exchange was not authorized to do business within the UK.

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