European markets close higher following bumper manufacturing report

·3 min read
The FTSE closed higher after the bank holiday, despite fears of a third wave. Photo: Thomas Krych/SOPA Images/Sipa USA
The FTSE closed higher after the bank holiday, despite fears of a third wave. Photo: Thomas Krych/SOPA Images/Sipa USA

European markets were on a tear following the late May bank holiday weekend, as investors parsed positive manufacturing data across the continent. 

The FTSE 100 (^FTSE) closed the day 1% higher in London. France's CAC (^FCHI) was also up 0.8%, while Germany's DAX (^GDAXI) headed 1% north.

The rises come following data from Markit's purchasing managers index that showed UK manufacturing was at another record high. Data from the eurozone also showed a new record improvement. 

Investors seem to have shrugged off the news that the UK could be in the early stages of a third wave of COVID infections. 

Prof Ravi Gupta, from the University of Cambridge, warned on Tuesday that the Indian variant of the virus had fuelled "exponential growth", although caseloads in the UK are still relatively low.

"Of course the numbers of cases are relatively low at the moment – all waves start with low numbers of cases that grumble in the background and then become explosive, so the key here is that what we are seeing here is the signs of an early wave," he told BBC Radio 4's Today Programme.

Gupta is one of a growing collection of voices advising that the 21 June easing date for lockdown restrictions should be pushed back. 

The UK government has always said that the easing of lockdown would be guided by "data not dates". 

Watch: European stocks higher on strong economic data 

Analysts at Spreadex said that the FTSE "benefited from a strong performance from its miners and, after news of surging house prices thanks to the stamp duty holiday rush, some nice gains from the likes of Barratt Developments and Persimmon."

"The FTSE is now trading just short of 7,080; finish the day at that price, and it would be its best close in over a fortnight. However, it spiked above 7,050 multiple times in the final week or so of May, but was unable to build any sense of momentum, wilting at the closing bell each day. If it can avoid the same fate this afternoon, the FTSE could find itself turning a corner."

The DAX had closed 0.6% lower on Monday as the country's rate of inflation hit its highest levels since 2018. It rose to 2.4% in May, largely due to an increase in energy prices. 

Read more: Sustainability and societal changes spur a generation of conscious UK investors

US stocks were mixed at the closing bell in London. The S&P 500 (^GSPC) rose 0.1%, while the Dow (^DJI) was up 0.3%. The Nasdaq (^IXIC) fell 0.2%.   

"Despite all inflation concerns, investors are still happy to support riskier assets, but this view isn’t shared by most of them as they continue to wait for another major catalyst that is likely to set the tone for markets," said Naeem Aslam, chief market analyst at AvaTrade. "This was one of the major reasons that we have not seen any decent trading volume during the last month."

Overnight, equities in Asia were mixed. Japan's Nikkei (^N225) finished the day 0.2% lower. 

Meanwhile, Hong Kong's Hang Seng (^HSI) traded up 0.6% and the SSE Composite Index (000001.SS) was up 0.1%. 

On Monday, Japan reported weaker-than-expected growth in factory output and Chinese manufacturing growth was flat.

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