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Shares in Europe Climb on Renewed Optimism, US Futures Steady

European shares advance on Friday after a disappointing session yesterday. Wall Street stocks struggle to the upside with Dow as the only winner on Thursday.

SageFX - Jul, 16, 21

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Principal Points

  • European shares advance on Friday after a disappointing session yesterday
  • Wall Street stocks struggle to the upside with Dow as the only winner on Thursday

In the early hours of Friday’s session, stocks across the board in Europe are flashing green as investors try to pare some of the losses from yesterday.

European bourses sank during Thursday’s market session on increased growth worries exacerbated by weak earnings reports. Losses across the board dragged the pan-European Stoxx 600 lower by 4.36 points, or 0.95%. The broad-based index ended the session at 456.20, a little over 1% off all-time highs reached on Tuesday.

Disappointing earnings dampened the positive sentiment in Europe, coupled with rising Delta virus cases. The oil and gas sector fell 2.7% to a six-month low as Brent crude slid for a second straight day, to an overall decline of nearly 5%.

Economically sensitive stocks continued their descend pressured by low demand in light of the sharp climb in Covid-19 cases across the continent. Banks, automakers, and travel shares slid between 0.3% and 1.6%. Less than a week before the UK officially removes virtually all Covid-19 restrictions, official data showed the country registered nearly 50,000 new cases on July 15, the highest daily increase since early January. As investors grew wary that rising cases could dent the economic recovery and hurt consumer spending, they offloaded risk, causing the FTSE100 to drop 79.17 points, or 1.12%, to 7,012.02.

All major European benchmarks declined on Thursday. The German Dax and the French CAC40 were each down about 1%, while the Spanish IBEX35 stumbled 1.52%.

High Hopes Diminish Over Week

Earlier in the week, European bourses were lifted by high hopes that the economic recovery remained robust as companies were expected to start reporting their earnings for the second quarter. The elevated mood, however, diminished when reports started coming in lower than expected.

Siemens Energy dropped 11.1% after its wind power division Siemens Gamesa was hit by a surge in costs for raw materials. Siemens Gamesa slid 14.2% on the news and was the worst performer in Europe’s blue-chip index.

ASOS, an online fashion retailer, dropped 18% after it announced sales growth for June suffered while the higher cost for materials and production did not result in price increases for customers.

On Wall Street, stocks ended Thursday action mostly lower despite the earnings reports continued to arrive better than expected. The Dow Jones Industrial Average was the only performer in positive territory, up 0.15%. The S&P500 and the Nasdaq Composite declined 0.33%, and 0.70%, respectively.

Morgan Stanley reported a 10% rise in second-quarter profit boosted by deal-making fees. The investment bank said profit arrived at $3.51bn, or $1.85 a share, on revenue of $14.76bn.

Friday’s futures markets indicate a fairly flat open for all three stock averages.

Meanwhile, the US Labor Department reported weekly jobless claims reached a new pandemic-era low of 360,000. The four-week moving average fell to 382,500, also a new bottom since the pandemic began more than a year ago.

In cryptocurrency, bitcoin declined about 6% on Thursday as crypto participants are still unable to produce a strong upside swing. Ether also registered a drop by falling nearly 8% amid broader crypto market weakness.