European markets opened higher on Thursday, as hopes grew of a “relatively rapid” recovery amid new central bank forecasts and Chinese export data.
The pan-European Stoxx 50 index (^STOXX50E) was trading 0.6% higher in early trading. Germany’s DAX (^GDAXI) was up 0.8%, France’s CAC 40 (^FCHI) was up 0.6% and Britain’s FTSE 100 (^FTSE) edged 0.3% higher at around 8.30am in London.
It came after Chinese export data smashed through expectations, with overseas sales up 3.5% year-on-year in April despite the pandemic. Analysts had expected a 15.1% decline, according to Reuters.
Beijing also pledged more stimulus on Wednesday (6 May), including extending tax cuts for small companies and allowing banks to boost unsecured lending. Investors hope the recovery could be faster than previously expected in China, aiding global economic recovery.
The export data pared losses on Asian stock markets overnight, which had been knocked by resurgent US-China tensions over the coronavirus. Japan’s Nikkei index (^N225) closed 0.3% higher, while China’s Shanghai Composite index (000001.SS) closed down 0.2% and Hong Kong Hang Seng (^HSI) trimmed losses to close 0.5% lower.
The Bank of England also published recovery forecasts that lifted the mood of some investors on Thursday, despite its bleak short-term verdict on the crisis.
The central bank warned COVID-19 is “dramatically reducing jobs and incomes,” and will knock 15% off GDP this year. But it appears more optimistic about the pace and scale of recovery than some, expecting activity to pick up “relatively rapidly” in the third quarter of this year.
It forecasts an eye-catching 15% recovery in British economic output in 2021, with activity reaching pre-virus levels in the second half of next year. “Given the assumed path for the relaxation of social distancing measures, the fall in GDP should be temporary and activity should pick up relatively rapidly.”
The bank’s latest monetary policy report does warn “a degree of precautionary behaviour by households and businesses is assumed to persist,” however.
US futures also pointed to a higher open. Dow Jones Industrial Average futures (YM=F) were up 1.2%, S&P 500 futures (ES=F) were 1.3% higher and Nasdaq futures (NQ=F) were 1.4% higher at around 4am eastern time in the US.