Good morning and welcome to our rolling coverage of the world economy, the financial markets, eurozone and business
Markets are still riding on a wave of economic optimism, boosted by a strong survey of China’s services sector, which hit a near-10-year high last month.
The Caixin China services purchasing managers index (PMI), a private survey, jumped to 55.0 in May from 44.4 in April, above the 50 mark that separates expansion from contraction, after falling below 50 for three months because of the coronavirus pandemic.
It is the highest reading since late 2010. New orders also recorded their biggest increase since September 2010 as demand from within China recovered. The services sector makes up about 60% of China’s economy.
This has boosted stock markets in Asia and is also expected to spill over into Europe. Japan’s Nikkei rose to its highest level since February and closed 1.29% higher, while Hong Kong’s Hang Seng rose 1.32% and South Korea’s Kospi added 2.87%, after the South Korean government proposed its biggest stimulus package yet.
MSCI’s gauge of stocks across the globe rose 0.3%, hitting a three-month high and taking the gain from its trough on 23 March to almost 36%.
Over here, the FTSE 100 index in London is expected to open 60 points higher and Germany’s Dax is being called 125 points higher.
Global stocks have so far shrugged off the growing unrest in the US after the killing of George Floyd, along with simmering trade tensions between the US and China. Despite protests sweeping across US states, night time curfews and president Donald Trump calling for the military to intervene, US markets closed at their highest level in three months yesterday.
Oil prices are also rallying, with Brent crude, the global benchmark, rising 1.84% to $40.30 a barrel. Earlier, it hit $40.53, the highest since early March, after gaining 3.3% on Tuesday. US light crude gained 2.7% to $37.82 a barrel. Oil prices have been boosted in recent weeks by growing evidence that China’s economy is recovering from the Covid-19 pandemic, and the easing of lockdowns around the world. This suggests demand for oil will pick up.
On the economic data front, we’ll be getting final readings for the services and composite PMI surveys in the eurozone and UK this morning, as well as unemployment rates for Germany, the EU and the eurozone.
Michael Hewson, chief market analyst at CMC Markets, says:
The biggest worry remains around Spain and Italy who rely so much on tourism in their services sector, and whose recovery is likely to be slow and painful, as tourists stay away. The recent flash numbers from France, Germany and the UK saw improvements from a record lows in April to 29.4, 31.4 and 27.8 respectively.
- 8:15am-8:55am BST Spain/Italy/France/Germany Markit Final services and composite PMIs (May)
- 8:55am BST: German unemployment rate (April) (Forecast: 6.2%)
- 9am BST: Eurozone Markit Final Services and composite PMIs (May) (Forecast: 28.7 / 30.5)
- 9:30am BST: UK Markit Final services and composite PMIs (May) (Forecast: 28 / 28.9)
- 10am BST: Eurozone unemployment rate (April) (forecast: 8.2%)
- 1:15 BST: US ADP Payrolls report
- 2:45pm BST: US Markit Final services and composite PMIs (May) (Forecast: 36.9 / 36.4)
- 3pm BST: US ISM Non-Manufacturing PMI (May) and factory orders