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SAP, China Rally Sends Europe Stocks Up

European stocks surged on Thursday, driven by software group SAP’s possible recovery from the pandemic. Meanwhile, rebound expectations regarding China’s economy helped lift sentiment on the continent.

The broader Euro STOXX 600 gained 0.1%, while Germany’s DAX index strengthened by 1% and outperformed its European peers. This was after some data released on Thursday showed the country’s exports bounced back in May. The news was quite positive, as this was while those lockdown measures imposed to contain coronavirus were lifted.

The Federal Statistics office said seasonally adjusted exports were up by 9% on the month. Previously, they fell by 24% in April.

The SAP provided additional support as it rose by 6.5%. This was after the German company confirmed its full-year outlook. They also stated that business activity gradually improved in the second quarter. These prospects were based on preliminary results for the period ending on June 30. The stock was last up by 7.6%.

Pandora A/S advanced by 1.2% after the Danish jewelry maker raised its earnings forecast for the second quarter. They said the markets have resumed operations quicker than expected, with slightly faster traffic recovery to reopen stores and continue strong online performance.

It added that over 86% of its stores are now open. Pandora’s stock was last up by 4.9%.

France’s CAC 40 shed 0.05%, while the UK’s FTSE 100 lost 0.6%.

In China, miners, luxury stocks, and carmakers all traded in green territory. This was while the Shanghai Composite index posted its longest winning streak in more than two years. It extended to its eight days of gains on expectations of a quicker recovery for the world’s second biggest economy.

Broadly speaking, the Chinese economy is coping better not only with the recovery but also in dealing with the potential of a second wave (of infections), according to FX strategist Rodrigo Catril.

The country’s factory gate prices dropped for the fifth straight month in June, but signs of a rebound in some parts of the sector which suggested a gradual but steady recovery intact remain.

 

Investors Cautious Over New Virus Cases Ahead of New Earnings Season

Finance ministers from the euro area will meet virtually on Thursday. They aim to discuss the bloc’s multi-year budget and a proposed €750 billion ($851 billion) recovery fund in advance.

Hopes are high that the recovery fund will be approved during the European Union (EU) summit. This is due to take place on July 17-18. While Europe seems to have done well in handling COVID-19, the European Commission’s latest economic forecasts signaled a potential contraction of 8.7% in the eurozone.

Furthermore, data from Johns Hopkins University showed that there are now over 12 million cases of infections around the world, with several countries re-imposing lockdown measures to contain new outbreaks.

The US reported its largest number of daily new cases since the outbreak started, and investors are likely to be cautious about what the new earnings season will present when it begins next week.

Chief market strategist Guy Miller stated that they are in a position where companies can surprise positively versus expectations because the bar has come down quite sizably for this year and activity has picked up substantially in the last two months

The question is what happens from here. The more challenging period will be when they get into the autumn months – if can they keep the pace of recovery up or have we just had a knee-jerk rebound, Miller added.

Tickers: European STOXX 600 (STOXX), DAX (GDAXI), Shanghai Composite index (SSEC)

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