European stocks extended gains for a third day on Wednesday as investors looked past domestic unrest in the U.S., and took inspiration from data indicating more economic strength as global pandemic lock downs unwind.
The Stoxx Europe 600 index SXXP, +1.40% rose 1.1% to 363.81, after closing up 1.6% on Tuesday. The German DAX index DAX, +2.28% climbed 1.7% to 12,225.9, after a Tuesday’s 3.7% surge, which marked its best close since May 4. The French CAC 40 index PX1, +2.00% rose 1.6% and the FTSE 100 index UKX, +1.47% rose 1.1%.
Hopes that global economies are turning the corner after the devastating coronavirus outbreak continued to rise. A private gauge of China’s service sector activity rebounded to a nearly 10-year high in May as domestic demand rose amid government measures to boost economic growth.
“This positive spill over looks set to continue here in Europe, as markets extrapolate out the improvements seen in the latest China data into the rest of the world,” said Michael Hewson, chief market analyst at CMC Markets, in a note to clients.
The eurozone services purchasing managers index rose to 30.5 in May from 12 in April, above the flash reading of 28.7 and a three-month high. That’s still well below the 50 mark, indicating deteriorating conditions, said IHS Markit. Elsewhere, German jobless claims rose by 238,000 in May, which marked a slower pace than in April.
Investors will be looking for the European Central Bank to expand the capabilities of its €750 billion Pandemic Emergency Purchase Program when it meets on Thursday.
U.S. stocks surged again Tuesday, with the S&P 500 marking its best gain in a week and futures indicating more gains for Wednesday. The ADP estimate of private sector employment in May is expected to show another 9 million jobs lost, and will serve as a preview of Friday’s official labor market report.
“While markets are being fueled on a bonanza of cheap money, there is a growing worry that investors are mispricing the economic scarring that is likely to be left once the full effects of the current crisis have started to become more apparent,” added Hewson.
Investors have also ignored U.S. unrest following the May 25 death of George Floyd and other recent racially charged killings. Ignoring curfews, U.S. protests continued late into Tuesday evening, mostly in Manhattan and Brooklyn, marking the eight day of nationwide unrest following the May 25 death of George Floyd and other recent racially charged killings.
Shares of Renault SA RNO, +7.74% surged 8.8% after the French car maker said it had completed a mostly government-backed credit facility agreement of up to 5 billion euros ($5.58 billion).
TUI AG TUI, +9.67% said it has agreed a compensation package and a new delivery deal with Boeing BA, +1.26% for its 737 MAX aircraft that will significantly reduce capital and financing requirements for the travel group. Shares surged 7%.