European markets rode a wave of optimism as China appeared to authorize measures to stimulate local economies.
How did markets perform?
The Stoxx 600 SXXP, +0.91% climbed 0.9% to 381.5. On Monday, it edged up 0.2%.
In Germany, the DAX DAX, +1.30% led the regional indexes as it reopened after being closed Monday. It rose 1.3% to 12,206.5.
The U.K.’s FTSE 100 UKX, +0.50% increased 0.5% to 7,412, adding to Monday’s gain of 0.6%.
The pound GBPUSD, +0.2444% bounced back by 0.2% to $1.2706, after sinking 0.5% Monday.
France’s CAC 40 PX1, +0.80% was 0.8% higher at 5,423.1. It edged up 0.3% Monday.
Italy’s FTSE MIB I945, +0.89% was at 20,658.6, adding 0.9% to Monday’s increase when it moved up 0.6%.
What’s moving the markets?
U.S. President Donald Trump’s rhetoric on China grabbed the headlines, but markets appear to be rallying on news that China has reopened the credit spigots. Xinhua reports that local governments are being urged to issue “special” bonds to pay for major projects such as the development of the Beijing-Tianjin-Hebei region. Local government debt has frequently been cited as a concern by observers worried about the nation’s debt burden, an obstacle in the government’s plan to shift the economy toward consumption-led growth.
President Trump meanwhile told CNBC that China will make a deal “because they have to”, and threatened to increase tariffs if China’s President Xi Jinping doesn’t attend the G-20 summit. Trump also complained about the weakening Yuan, which fell to year-to-date lows against the U.S. dollar Monday.
After a significant period of concern around whether Italy would challenge the European Union over its debt rules, Prime Minister Giuseppe Conte issued a statement saying the leaders of the country’s fractious governing coalition agreed to work together to avoid EU disciplinary action. Euroskeptic Deputy Prime Minister Matteo Salvini said their goals included safeguarding economic growth and avoiding tax increases.
In the U.K., average weekly earnings for April showed an increase of 3.4%, outpacing economists’ forecasts of 3.2%, while unemployment remained at 3.8% as expected. “The labor market continues to be strong, with employment still at a joint record rate,” said Matt Hughes, deputy head of Labour Market at the Office of National Statistics. “However, while the number of vacancies remains high, it has fallen back slightly from the historic highs seen at the turn of the year.”
Which stocks are active?
Ted Baker PLC TED, -26.49% shares plummeted 25.7% as the fashion brand and retailer issued a profit warning, reducing projections of pretax profits in the fiscal year to January 2020 to between £50 and £60 million, versus prior guidance of £70 million. The company cited “extremely difficult trading conditions”.
Shares in safety, health and environmental technology company Halma PLC HLMA, +2.18% rose 2% after earnings showed record pretax profit in fiscal 2019 of £206.7 million, up from £213.7 million in the prior year.
Russ Mould, investment director at AJ Bell, said the company ought to be a household name: “Halma’s dividend has doubled in the past decade alone and the manner in which this reflects the company’s strong long-term position and transmits management’s confidence in the future brings share price rewards.”
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