Coronavirus: Stocks tread water as recovery signs offset virus fears

Tom BelgerFinance and policy reporter
Yahoo Finance UK
Property sales have seen a record jump in the US. Photo: Andrew Holbrooke/Corbis via Getty Images
Property sales have seen a record jump in the US. Photo: Andrew Holbrooke/Corbis via Getty Images

Leading European stock indices treaded water as markets opened on Tuesday, as fresh signs of recovery in the US and China offset heightened fears over coronavirus infection rates.

France’s CAC 40 (^FCHI) and Germany’s DAX (^GDAXI) were trading near-flat at around 8.30am in London. Britain’s FTSE 100 (^FTSE) shed 0.3% however, as official figures showed the worst UK slump since 1979 even before the pandemic’s effects had been fully felt.

New economic data boosted the mood. US stocks had closed higher on Monday (29 June) and Asian stocks rose overnight on a record jump in US housing sales and a fourth straight month of growth in Chinese manufacturing.

The number of home sales agreed in the US leapt 44.3% in May, the highest on record since the National Association of Realtors’ survey began in 2001. It signalled a strong rebound in the US housing market, though activity remained 10.6% down on February levels.

READ MORE: Stocks rise on Monday despite global death toll passing 500,000

Meanwhile in China, new purchasing managers’ index (PMI) data for manufacturing showed higher growth than expected in June, and at a faster rate than the previous month. Japan’s Nikkei 225 (^N225) rose 1.3% overnight, while Hong Kong’s Hang Seng (^HSI) index rose 0.4% and China’s Shanghai Composite index (000001.SS) gained 0.8%.

But investors continued to weigh economic reopening from lockdowns against concerns over the spread of COVID-19. The World Health Organization (WHO) warned on Monday ( 29 June) the pandemic was “speeding up” worldwide, with parts of the US including Texas, Florida and California among the areas seeing new cases continue to rise.

US stock futures were pointed to a mixed open. S&P 500 (ES=F) futures and Dow Jones (YM=F) futures were down 0.3% after the leading indexes rose on Tuesday, while Nasdaq (NQ=F) futures were flat at around 3.30am eastern time.

Michael Hewson, chief market analyst at CMC Markets UK, said the “remarkable” rebound in US and European stocks in recent months looked set to continue in July.

READ MORE: UK suffers worst slump since 1979 in early stages of pandemic

“Investors may be making the calculation that politicians won’t stop the ongoing moves to reopen economies around the world, despite rising infection rates, banking on perhaps, that it is the least worst option,” he said.

“It is this calculation that appears to be driving risk appetite, along with the fact that while the infection rate is rising the fatality rate is not, and it is that, more than anything, is probably the most important statistic.”

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