US stocks have fallen in the wake of dire retail sales data, even as the FTSE 100 has risen on the final day of a choppy week of trading that has seen investors second-guess the recent stock market rally.
The UK’s FTSE 100 index was up 1.5 per cent this afternoon at 5,785 points in the wake of better-than-expected Chinese factory data. It tumbled 2.8 per cent yesterday, however, as global sentiment darkened amid warnings over the economy.
Wall Street initially fell sharply, but US stocks recovered some ground as economic signals pulled investors in different directions.
The Dow Jones was down 0.2 per cent in early trading while the S&P 500 was 0.3 per cent lower.
European markets rose despite terrible Eurozone economic data. The continent-wide Stoxx 600 was up 1.1 per cent and Germany’s Dax was 1.7 per cent higher.
Jasper Lawler, head of research at London Capital Group, said: “Shares in Europe are playing catch up with a late turnaround on Wall Street that happened yesterday after the European close.”
Chinese data helps FTSE 100’s miners
Data this morning showed that Chinese factory output rose for the first time this year. Industrial output increased 3.9 per cent, better than the 1.5 per cent increase economists had been expecting.
This lifted the commodity-heavy FTSE 100, with investors buoyed by the news of rising demand. Miners including Anglo American, Glencore and BHP Group all climbed more than five per cent.
“However, a full recovery is not in sight yet,” said Hao Zhou, an analyst at Commerzbank. “The road ahead will be rocky due to a weak job market, high leverage and policy execution difficulties.”
Investors were not dissuaded from buying equities by data that showed the Eurozone economy shrank by 3.8 per cent in the first quarter, its worst three months on record.
Markets have largely looked past GDP data because they have already “priced in” large drops in output.
US stocks brush off retail sale plunge
US stocks opened sharply lower after data showed that retail sales dropped by 16.4 per cent in April. That was the sharpest fall on record for the second month in a row.
However, stocks recovered some ground so they were only marginally lower an hour into trading. Rising oil prices helped US stocks, providing investors with an encouraging signal about future demand.
Brent crude was up 2.5 per cent at $31.90 per barrel. WTI crude, the US benchmark, was five per cent higher at $29. US oil giants Exxonmobil and Chevron both climbed.
Despite the FTSE 100 and European rally, gold hit a one-month high as investors hedged their bets on an economic recovery.
“Extra dollars being printed and the rising possibility that the US Federal Reserve eventually gives in to negative rates are positives for non-interest bearing assets,” said Lawler of London Capital Group.
US and UK government bonds both fell as investor confidence sent European stocks higher.
The pound was down 0.7 per cent against the dollar at $1.214 as the latest round of Brexit talks ended with little progress.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: “The clock is ticking louder to the critical 2 June deadline and the chances of seeing a deal remain slim.”