London: Figures showing the fastest pace of growth in eurozone business activity for six years propelled European stocks to a 14-month high yesterday, reversing an earlier fall after the continent’s biggest bank HSBC reported a surprise slump in profits.
Europe’s benchmark index of 300 leading shares rose 0.3 percent to 1,468 points, led by purchasing manager index (PMI) reports that showed the eurozone economy expanding much faster and more smoothly than expected. Growth in Germany’s private sector reached its highest level in nearly three years, while French business activity surged to near a six-year high.
Overall, the PMIs showed that private sector manufacturing and service sector activity in the eurozone this month was its strongest since April 2011.
“The eurozone recovery powers ahead in February, with the PMIs showing a further strong acceleration from already solid levels,” wrote Marco Valli, chief eurozone economist at UniCredit. Economists at JP Morgan raised their second quarter eurozone growth forecast to 2 percent annual rate from 1.5 percent.
Germany’s DAX gained 0.5 percent to hit its highest level since May 2015, while France’s CAC 40 reversed earlier losses to trade 0.3 percent higher.
The turnaround in Europe followed an initial slide on HSBC’s earnings. The shares in Europe’s largest bank by assets fell 7 percent, on track for their biggest fall since March 2009, after the bank said pre-tax profits last year slumped 62 percent, far more than analysts had expected.Europe’s banking index was last down 1.2 percent, having fallen as much as 2 percent in early trade. “In spite of the plunge it’s still up more than 50 percent from its post-Brexit low,” said Neil Wilson, senior market analyst at ETX Capital, referring to HSBC’s share price.
“But all the dollar-earning upside may have been baked into the stock price already and with the pound now pretty steady, the free ride for HSBC’s shares looks over.”
Europe’s bounce pushed US stock futures further into positive territory, with Wall Street now called to open 0.3 percent higher on the first day of trading since Friday. US markets were closed for the Presidents Day holiday on Monday. MSCI’s world stock index and MSCI’s broadest index of Asia-Pacific shares outside Japan were both flat on the day, supported by the turnaround in Europe. China’s blue-chip index rose to its highest in over two months, extending gains from Monday - its best day in six months - on reports that pension funds would begin pumping funds into the country’s stock markets.
With US markets closed on Monday, Asian markets had few global cues off which to trade. US futures point to a rise of around 0.1 percent at the open on Wall Street .
