Europe rallies on impressive China, US data

European equities head higher

European bourses are on the rise rounding off an upbeat week. Following all-time highs on Wall Street overnight and record Chinese quarterly economic expansion, stocks across Europe appear well supported heading towards the weekend.

Signs of strong economic recoveries in the world’s two largest economies is buoying demand for riskier assets globally and key levels are being breached across the board. The DAX trades at an all-time high whilst the FTSE has crossed the key 7000 level, fairly apt in the week that the UK economy continued to reopen. 7000 was a level last seen around the pandemic crash. The more domestically focused FTSE250 has rallied to record levels boosted by travel and leisure stocks on reopening optimism.

Data revealed that the Chinese economy continues to spring back from the covid pandemic. First-quarter GDP leapt 18.3% year on year, which slightly undershot the 19% forecast but was still the fastest rate since records began.

The impressive data came hot on the heels of blowout US retail sales figures, strong jobless claims numbers and a solid start to US earnings season. Upbeat earnings in Europe are adding to the buoyant mood.

This week we have seen factors really line up, pointing to a robust economic recovery. At the same time, the Fed have reiterated its supportive stance and yields have declined across the week. This is a setup which favors further gains.

Looking ahead, US futures are pointing to a broadly upbeat start, with the S&P and Dow Jones aiming to attack new all-time highs. The tech-heavy Nasdaq is trading mildly lower in response to a rise in yields today. Investors will be looking towards US consumer confidence data which is expected to reach a pandemic high as stimulus checks and an improving labour market boost confidence. Even so, morale still remains around half of its pre-pandemic level.

DXY steady, GBP declines on Brexit concerns

The FX markets are fairly subdued on the final day of the week.

The US dollar is ticking a few pips higher, tracing treasury yields northwards. Despite the blowout US data in the previous session, the greenback is still on track to lose ground across the week as it continues to trade around a 4 week low.

The euro has edged a few pips higher and is on track for gains across the week as the covid vaccine picture could be turning a corner on the continent. Germany expects 20% of the population to be vaccinated by the end of the month.

The pound is under pressure, trading below 1.3750 and at session lows. The UK economy continues to benefit from the reopening, with the removal of more restrictions this week. However, the pound has struggled to find demand this week; this is because the reopening optimism is mostly priced in. Brexit concerns, particularly surrounding the Northern Ireland border, in addition to Scottish Independence calls are dampening the mood for sterling.

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