Stocks rally as investors shrug off growth concerns

·3 min read
Stocks in Europe and Wall Street jumped despite economic gloom. Photo: John Smith/VIEWpress)
Stocks in Europe and Wall Street jumped despite economic gloom. Photo: John Smith/VIEWpress

European and Wall Street stocks were in the green on Friday despite a slump in China's economic growth and eurozone trade deficit hitting a 33-year high.

In London, the FTSE 100 (^FTSE) was up 1.8% after the closing bell, France’s CAC (^FCHI) rose 2.1% on the day and the DAX (^GDAXI) advanced 2.7% in Frankfurt.

It comes as the eurozone's goods trade deficit soared to a record high as energy prices soar, exacerbated by Russia's war in Ukraine.

Imports into the 19-country single currency area jumped by 52% in May from a year ago, to €274.8bn ($276.6bn, £233.6bn).

That outpaced exports, which rose nearly 29% to €248.5bn, according to official data from Eurostat.

This compares with an €84bn goods trade surplus in the same period last year.

"Friday’s session has seen the dip buyers come back into the fray, emboldened by some better US retail sales figures," said Chris Beauchamp, chief market analyst at online trading platform IG.

"We are seeing yet another attempt at a ‘bear market rally’, and a decent one is certainly overdue."

Across the Atlantic, Wall Street indices rallied as upbeat retail sales numbers calmed some concerns about a looming recession in the world's largest economy.

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The S&P 500 (^GSPC) pushed 1.7% higher, the tech-heavy Nasdaq (^IXIC) jumped 1.4%, while the Dow Jones (^DJI) surged 2% at London's close.

Asian stocks closed in mixed territory overnight after China's economy narrowly missed a contraction as its zero-COVID policy battered growth.

Gross domestic product (GDP) rose just 0.4% in the second quarter, a more significant slowdown than forecasts, compared with 4.8% the previous quarter.

Beijing's aggressive approach to curb new waves of COVID-19 led to a slump of almost 14% in Shanghai, which was subjected to some of the harshest lockdowns.

The figures marked the slowest pace of growth since the first wave of the pandemic in early 2020.

In Tokyo, the Nikkei (^N225) rose 0.5%, while the Hang Seng (^HSI) tumbled 2.2% in Hong Kong and the Shanghai Composite (000001.SS) lost 1.6%.

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Danni Hewson, financial analyst at AJ Bell, said: "A barrage of news concerning China has given parts of the market something new to worry about.

"China is one of Asia’s key growth powerhouses. We already knew that growth expectations were being pared back, but the latest GDP figure is the sort of pedestrian number one might expect from a developed Western nation.

"This doesn’t bode well as recession fears grow in many parts of the world, and it could fuel speculation that China’s commodities appetite may wane if economic activity is stalling."

Meanwhile, copper (HG=F) has tumbled to its lowest level in 20 months amid concerns over a worldwide recession.

The metal, used in everything from iPhones to cars, dropped below $7,000 a tonne for the first time since November 2020, dropping 35% from its all-time high just four months ago.

Copper, a staple of the global economy, soared earlier in the year amid supply worries sparked by Russia's invasion of Ukraine.

Watch: What is a recession and how do we spot one?

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