By Barbara Kollmeyer, MarketWatch , Josie Cox
Thin trade likely
European stocks rose Monday, recovering from one of the worst
weeks in months, supported by robust manufacturing data across the
region.
Having opened the session lower, Germany's DAX 30 and France's
CAC 40 were trading 0.9% and 0.4% higher by midmorning, helping the
Stoxx Europe 600 to a 0.5% gain, after figures showed that the
eurozone's manufacturing sector expanded again in April.
Data firm Markit, which surveys more than 3,000 manufacturers
across the eurozone, said that its purchasing managers index was at
52.0 for the month, down from 52.2 in March, but still higher than
the 51.9 figure previously estimated by Markit.
A reading below 50.0 indicates business activity is declining,
while a reading above that level implies it is increasing.
Strong figures for individual countries buoyed stocks indexes in
Southern and Northern Europe too, but trading volumes were capped
by a market holiday in the U.K. The main indexes in Spain, Italy
and Portugal rose 0.6%, 0.7% and 1.5%, while Norway's main index
added 0.9% and Sweden's 0.6%.
The FTSE 100 is closed Monday for a bank holiday.
Last week, most major indexes in Europe fell more than 4% as
investors abruptly distanced themselves from some of the most
successful trades so far this year, fearful that the rally in
stocks, bonds and the U.S. dollar may have become dangerously
overdone.
The shift also saw German government bonds, or Bunds -- buoyed
by ferocious demand throughout the first four months of the year --
tumble.
On Monday, the yield on the 10-year Bund was steady at around
0.37%. Bond prices fall as yield prices rise and less than two
weeks ago the 10-year Bund yield hit an all-time low of 0.05%,
spurring predictions of zero or even negative yields on the
benchmark for European credit markets.
"To our minds, the shift that began last week marks a new
crossroad on liquidity and fundamentals and things can no longer
remain the same," Michala Marcussen, chief economist at Société
Générale, said.
Barclays economist Philippe Gudin, however, cautioned that it is
too early to conclude that this is the start of a big and sustained
rise in bond yields in the euro area.
"We are more inclined to interpret it as a healthy positioning
or liquidity-led correction for now," he said.
In currency markets Monday, the euro (EURUSD), which early
Friday had climbed to a two-month high against the U.S. dollar,
fell around 0.5% to $1.1146.
Like European stocks and government bonds, the dollar surged
during the first part of 2015, rising to its highest level against
the euro since 2003, also as a result of the European Central
Bank's EUR60 billion a month bond-buying stimulus pressuring the
euro.
But that trend has also slowed in recent weeks and has in the
last few days has even showed signs of reversing.
Roelof-Jan van den Akker, a technical strategist at ING, said
that like the recent moves in bond and stock markets, this could
mark the start of a "larger consolidation phase" but like in the
other asset classes, not everyone agrees.
Currency strategists at BNP Paribas said that the dollar's
decline in recent days has created a fresh buying opportunity for
some.
"We expect [euro] sellers to return now that positioning is more
balanced," they wrote in a note.
In commodity markets, Brent crude added 0.6% on the day to
$66.84 per barrel, while gold (GCM5) rose 0.6% to $1,182.10 a troy
ounce.
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