The European stock market lifted from a weak open as new purchasing managers’ indexes displayed encouraging data.
Thursday, October 23, 2014
The European benchmark index, the Stoxx Europe 600, opened down more than 1% but gained 0.2% after the PMI data. The German DAX 30 and the French CAC 40 both added 0.6%.
The manufacturing PMI surprised analysts by reaching 50.7, which marked a 2-month high. A number above 50 indicates expansion. Some economists anticipated the index would drop below 50 for the first time since June 2013. Germany rebounded from recent manufacturing woes as the PMI progressed to 51.8 from September’s 49.9 level, per a Markit Economics report.
Earnings data counteracts PMI data
Economists are pleased with the unexpectedly high PMI data, but disappointing earnings tempered that optimism. Michelin shares fell 5.4% after announcing its third quarter sales declined 4.6% to 4.89 billion euros. Analysts expected a level of 5.01 billion euros. A measure of mining companies fell, led by Anglo American’s 1.6% drop and Rio Tinto Group’s 1.2% slump.
“The earlier gains were all about German data coming in better than expected because it’s been a long time since we’ve had any positive economic surprise in Europe,” Steven Santos, a broker at X-Trade Brokers DM SA in Lisbon, told Bloomberg. “But markets have been finding it difficult to maintain strong gains lately. The economic environment continues to be subdued, and low commodity and metals prices reflect that. Optimism was short-lived and once again investors prefer to take money off the table.”
European equities spurred a worldwide downturn that saw a $5.5 trillion reduction in shares’ value. Earlier this month, the International Monetary Fund indicated that the eurozone could fall into recession, while investors anticipated European Central Bank stimulus would not move the needle on economic growth.
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