Markets rally on upside German growth surprise
LONDON — Stronger-than-anticipated economic growth in Germany has helped shore up markets Tuesday even though Europe’s economy as a whole appears headed for recession.
Investors breathed a sigh of relief on the news that Germany, Europe’s biggest economy, posted 0.3 percent growth in the second quarter. The consensus in the markets was for a lower figure, with some analysts predicting a flat reading.
“The data helps to calm markets, but isn’t so good that it disrupts the narrative of impending central bank intervention,” said Chris Beauchamp, market analyst at IG Index.
In Europe, Germany’s DAX was up 0.7 percent at 6,955 while the CAC-40 in France rose 0.4 percent to 3,440. The FTSE 100 index of leading British shares was 0.5 percent higher at 5,861.
The euro also remained fairly buoyant, trading 0.2 percent higher at $1.2360. Around a month ago, Europe’s single currency appeared headed to fall below its two-year low of $1.18.
Wall Street was poised for a solid open later too, with both Dow futures and the broader S&P 500 futures up 0.2 percent.
Over the past few weeks, stocks, as well as the euro and the price of oil, have rallied on hopes the world’s major central banks will do more to shore up the global economy.
While the U.S. Federal Reserve and the Chinese monetary authorities are expected to ease monetary policy further, the European Central Bank is widely-tipped to play a more crucial role in Europe’s debt crisis resolution efforts.
Another interest rate reduction from the ECB is also expected. Germany’s surprise growth in the second quarter was not enough to prevent the 17-country eurozone economy from contracting 0.2 percent in the period. It’s not yet in recession as output was flat in the first quarter — a recession is officially declared after two straight quarters of falling output.
“For now investors continue to put their faith in the actions of central bankers,” said David Morrison, senior market strategist at GFT Markets.
The attention later will be on U.S. retail sales data for a clearer reading of the health of the world’s biggest economy. Other U.S. economic data this week includes July industrial production figures. The retail sales figures are particularly important because they account for around 70 percent of the U.S. economy.
Earlier in Asia, Japan’s Nikkei 225 rose 0.5 percent to close at 8,929.88, while Hong Kong’s Hang Seng added 1.1 percent to 20,291.68. South Korea’s Kospi rose 1.3 percent to 1,956.96. On mainland China, the Shanghai Composite Index gained 0.3 percent to 2,142.53., while the smaller Shenzhen Composite Index gained 0.7 percent to 893.80.
Oil prices tracked equities higher, and the benchmark New York rate rose 34 cents to $93.07 per barrel in electronic trading on the New York Mercantile Exchange.