European and Asian stocks rebound at start of key week

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Equities updates

Stocks in Asia and Europe rallied on Monday, breaking last week’s downbeat performance ahead of likely hints from central banks on how and when they will cut back monetary support.

The region-wide Stoxx 600 index, Frankfurt’s Dax and Paris’s Cac 40 were up 0.3 per cent shortly after opening, as was the UK’s FTSE 100. In Asia, Hong Kong’s Hang Seng was up 1 per cent while the Nikkei 225 rose 1.8 per cent.

But the rallies still left key indices below the levels they held at the start of last week, before concerns over the potential global impact of the Delta variant of coronavirus sparked a turbulent run of trading.

“I don’t think anything from market behaviour tells us there’s anything new happening,” Anthony Collard, managing director at JPMorgan Private Bank, said of the rally. “It’s a mean reversion to a degree.”

Oil prices rose, after suffering last week as a result of weakening economic data. The global benchmark Brent crude price rose 2.4 per cent to $66.72 a barrel, while West Texas Intermediate was up 2.3 per cent at $63.55 a barrel.

European purchasing managers’ index data — broad gauges of corporate health — painted a mixed picture across markets. In the UK, the manufacturing and service sectors faced a sharp deceleration in growth, falling to the lowest level in six months.

Data from Australia also showed the country’s private sector had lost steam in August, due to the spread of Delta variant and resulting lockdown.

By contrast, eurozone business activity grew at one of the fastest rates in the past 20 years, with employment continuing to grow at the same rate as in June, a 21-year high.

“Although the spread of the Delta variant caused widespread problems across the region, curbing demand and causing further supply issues, firms benefited from virus containment measures easing to the lowest since the pandemic began,” said Chris Williamson, chief business economist at IHS Markit.

The big event for investors this week is the annual central bankers’ symposium at Jackson Hole, starting on Thursday. Interest in the meeting of monetary policymakers has been enhanced by dissent within the Federal Reserve over the speed at which it should trim its purchases of government debt.

The Fed’s $120bn-a-month asset purchase programme has been a vital pillar to the market recovery since the shock of coronavirus lockdowns over a year ago, injecting significant amounts of liquidity and support. Fed meeting minutes published last Wednesday indicated that a majority of Fed officials believed the withdrawal of the stimulus programme could start later this year, sending US stocks sliding.

Futures markets indicated a likely upbeat session for US stocks later in the day. Futures contracts tracking the S&P 500 were up 0.2 per cent, while those following the tech-focused Nasdaq 100 rose 0.3 per cent.

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