Upgrade Now

Europe close: Strong PMIs, Greek debt deal force traders to close 'shorts'

By Alexander Bueso

Date: Friday 22 Jun 2018

Europe close: Strong PMIs, Greek debt deal force traders to close 'shorts'

(Sharecast News) - A much-better-than-expected reading on recent levels of activity in the euro area services sector, alongside an agreement overnight to help improve the sustainability of Greece's mountain of sovereign debt, forced traders to take profits on their 'short' positions heading into the weekend.
Not even a late day tweet from the US President threatening tariffs on European-made cars managed to suppress Friday's bounce.

Contrary to economists' forecasts, IHS Markit's widely-followed 'composite' Purchasing Managers' Index for Eurozone services and manufacturing jumped from a reading of 54.1 in May to 54.8 (consensus: 53.8).

Critically, although the factory sector PMI dropped from 54.8 to 54.3 - plumbing a 19-month low - on the back of political and trade uncertainty, it was offset by a rise in the services PMI from 53.8 to 55.0 - a four-month high.

Commenting on those readings, Chris Williamson at IHS said: "While the June upturn provides some hope that the weakening of official data earlier in the year may have overstated the region's weakness, the risks remained tilted towards a further slowdown in the second half of the year."

Oil&Gas paces gains, Autos&Parts picked-off by White House

Against that backdrop, by the end of the session the benchmark Stoxx 600 had added 1.09% or 4.16 points to 385.01, alongside a rise of 1.34% or 71.37 points to 5,387.38 for the Cac-40 and a gain for the FTSE Mibtel of 0.99% or 215.36 points to 21,888.47.

Germany's Dax meanwhile was a relative laggard, advancing 0.54% or 67.81 points to 12,579.72. For the week as a whole, the Frankfurt bourse's top-flight index shed roughly 3.3%.

From a sector standpoint, Oil&Gas did best, with the Stoxx 600 sector gauge powering ahead by 3.15% or 10.61 points to 347.42.

Powering that advance, front month Brent crude oil futures rose by 2.2% to $74.66 a barrel on the ICE after OPEC+ countries announced a nominal 1.0m barrel a day increase in their combined output.

In practice, that was expected to be closer to 0.6m b/d due to the years of underinvestment and mismanagement that had hobbled output from Mexico and Venezuela.

The Pan-European index's Autos&Parts gauge on the other hand fell 0.64% to 572.32 after Donald Trump threatened a 20% levy on European cars coming into the US if the EU did not lower or rescind it tariffs and barriers on American rivals soon.

Euro area periphery in focus

Following a marathon round of talks overnight, the Mediterranean country's creditors, the International Monetary Fund, European Central Bank and European Union, agreed to extend the maturities on the €96.6bn of debt owed to them under the terms of the country's second bailout by 10 years.

They also granted Athens a 10-year grace period on the interest and amortisation payments due on those loans.

"We believe that the debt is now viable, we can have access to the markets now and in a context of surveillance and by continuing our reforms we can pursue this," said Greek finance minister Euclid Tsakalotos.

Reacting to the above, the yield on benchmark 10-year Greek government debt retreated by four basis points to 2.69%.

That was despite the "reservations" about the sustainability of the country's debt load aired by IMF Managing Director, Christine Lagarde, even after Thursday night's agreement.

Elsewhere, according to reports in the Spanish Press, the European Union's Finance Commissioner, French Socialist Pierre Moscovici, had reportedly mooted the possibility of relaxing the fiscal targets for the new Socialist government in Madrid.

Back on the corporate front, shares of Airbus were in the spotlight after the civilian and military air and space manufacturer said that a 'no deal' Brexit would result in the "severe disruption and interruption of UK production."

In particular, the Toulouse-based jet-maker said that even a 'transition deal' would prove "too short" for the company to make the "required changes with its extensive supply chain."

Overnight meanwhile, ratings agency Fitch revised down its outlook for Deutsche Bank's long-term credit rating, from 'stable' to 'negative'.

Also in Germany, Deutsche Telekom subsidiary T-Systems said it was planning 10,000 layoffs.


Email this article to a friend

or share it with one of these popular networks:

Top of Page