By Peter Nurse
Investing.com – European stock markets are set to open higher Wednesday, amid hopes for more stimulus and an economic recovery in the second half of the year despite a host of concerns from the coronavirus to growing U.S. civil unrest.
Earlier Wednesday, a closely-watched survey of China’s service sector activity showed its index recovered to pre-epidemic levels in May. This adds to various signs of recovery in business activity as governments slowly restart their economies.
Additionally, the European Central Bank is expected to ramp up stimulative bond purchases when it meets on Thursday, and this comes after the European Commission announced last week a 750 billion euro ($830 billion) recovery plan.
“The good times continue to roll in risk markets,” Mazen Issa, senior FX strategist at TD Securities, said in a report. “As intense as the rally has been, this is likely set to continue as the breadth of the equity rally has now spread outside the U.S.”
Still, there are various risks that could hobble the global economy, including a second wave of Covid-19 infections, fraught Sino-U.S. tensions and rising social unrest in the United States following protests against police brutality.
In corporate news Wednesday, Lufthansa (DE:LHAG) posted a hefty net loss of 2.1 billion euros ($2.35 billion) in the first quarter due to the pandemic The German airline agreed last week to a 9 billion. euro rescue package from the state.
AXA (PA:AXAF) has decided to cut its dividend for 2019 in half and the French insurance giant expects the coronavirus pandemic to have a negative impact on earnings for this year of around 1.5 billion euros ($1.67 billion).
“Labor market dynamics will be an important determinant for the depth and duration of the current crisis. So far, job losses in Europe have stayed more muted than the U.S., not least thanks to short-time working schemes,” said analysts at Danske Bank, in a note to clients.
Oil prices posted more gains Wednesday, climbing to near three-month highs amid optimism that major producers will extend production cuts later this week.
Helping the positive tone was the American Petroleum Institute reporting late Tuesday that U.S. oil supplies fell by 483,000 barrels for the week ended May 29.
At 2 AM ET, U.S. crude oil futures traded 3.5% higher at $38.09 a barrel, while the international benchmark Brent contract rose 2.4% to $40.52. These contracts have bothe climbed to the higest levels since March 6.
Stocks – Europe Seen Higher; Second Half Growth Expected
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