# European shares climb higher; oil hit by China demand concerns
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-08-02
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: European Shares Rise on Strong Earnings and Stimulus Hopes
Meta Description: European shares gain as Asian equities recover. Risk appetite boosted by earnings & U.S. stimulus plan. Oil prices hit by Chinese demand concerns.
URL: https://financedigest.com/european-shares-climb-higher-oil-hit-by-china-demand-concernshtml

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LONDON (Reuters) – European shares picked up in early trading on Monday after a recovery in Asian equities overnight, with risk appetite boosted by recent strong earnings and a U.S. infrastructure bill, though oil prices were hit by concerns about Chinese demand.

The MSCI world equity index, which tracks shares in 49 countries, was up 0.4% at 0805 GMT, after [Asian shares](https://www.financedigest.com/asian-shares-gain-as-fears-about-rapid-fed-hikes-bank-crisis-fade.html "Asian shares gain as fears about rapid Fed hikes, bank crisis fade") recouped some of their recent losses.

MSCI’s main European Index rose around 0.8%, while the Stoxx 600 hit a new all-time high, up 0.7%.

Risk appetite was boosted by the prospect of more fiscal stimulus in the United States, as senators introduced a sweeping $1 [trillion infrastructure spending](https://www.financedigest.com/european-governments-spend-half-a-trillion-euros-on-energy-crisis-report.html "European governments spend half a trillion euros on energy crisis – report") plan.

Earlier in the session, [Chinese stocks](https://www.financedigest.com/chatgpt-mania-pumps-up-chinese-ai-technology-stocks.html "ChatGPT mania pumps up Chinese AI technology stocks") rebounded after a sell-off caused by Beijing’s regulatory crackdown.

But [oil prices were down after a survey found that China’s factory activity growth slipped sharply in July as demand](https://www.financedigest.com/oil-gains-after-iea-sees-demand-rising-to-record-high.html "Oil gains after IEA sees demand rising to record high") contracted for the first time in over a year, prompting concerns about demand in the world’s second-largest oil consumer.

Asia’s factories [hit a rough patch in July as rising input costs and a new wave](https://www.financedigest.com/cash-loving-germans-fret-over-exploding-atms-as-cross-border-crime-wave-hits.html "Cash-loving Germans fret over exploding ATMs as cross-border crime wave hits") of coronavirus infections overshadowed solid global demand, highlighting the fragile nature of the region’s recovery.

At 0805 GMT, Brent [crude oil](https://www.financedigest.com/oil-near-flat-as-us-crude-stock-draw-contends-with-economic-concerns.html "Oil near flat as US crude stock draw contends with economic concerns") futures were down 1.2% and U.S. West Texas Intermediate (WTI) crude [futures were also down 1.2% on the day](https://www.financedigest.com/putins-victory-day-speech-leaves-no-clue-on-future-escalation.html "Putin’s Victory Day speech leaves no clue on future escalation").

Market attention now turns to PMI data for July, as well as the Reserve [Bank of Australia meeting](https://www.financedigest.com/the-recent-bank-of-england-meeting-the-biggest-rate-hike-recession-warning-and-the-fallout.html "The recent Bank of England meeting, the biggest rate hike, recession warning and the fallout") on Tuesday, the Bank of England meeting on Thursday, and U.S. payrolls data on Friday.

Only a few weeks ago the talk was of whether [central banks](https://www.financedigest.com/european-central-bank-to-raise-deposit-rate-to-3-25-by-mid-year-reuters-poll.html "European Central Bank to raise deposit rate to 3.25% by mid-year: Reuters poll") would feel confident enough to start scaling back some of the stimulus measures that have been in place since the start of the pandemic, as the global economy recovers,” Michael Hewson, chief market analyst at CMC Markets UK, said in a client note.

“This narrative appears to have shifted a touch to whether the economic rebound that we’ve seen so far this year may already starting to plateau, and begin to slow down.”

But UBS said in a [client note that the equity rally is justified and will continue](https://www.financedigest.com/impact-com-continues-momentum-in-the-first-quarter-fueled-by-client-growth-new-products-and-partnership-events.html "impact.com Continues Momentum in the First Quarter, Fueled by Client Growth, New Products and Partnership Events").

We believe the reopening and recovery [trend is on track and continue](https://www.financedigest.com/volkswagen-strikes-below-inflation-wage-deal-continues-german-trend.html "Volkswagen strikes below-inflation wage deal, continues German trend") to see upside for equities. But we see the greatest upside for cyclical parts of the market, including energy, financials, and Japanese stocks,” said Mark Haefele, chief investment [officer at UBS Global](https://www.financedigest.com/black-panther-sequel-ignites-box-office-with-330-million-global-debut.html "‘Black Panther’ sequel ignites box office with 0 million global debut") Wealth Management.

Manufacturing activity across the euro zone continued to expand at a blistering pace in July as the reopening of the economy led to rocketing demand, but supply bottlenecks sent input [costs soaring](https://www.financedigest.com/amazon-other-retailers-revamp-free-shipping-as-costs-soar.html "Amazon, other retailers revamp ‘free’ shipping as costs soar").

[Europe’s economic recovery](https://www.financedigest.com/europe-sees-travel-recovery-as-covid-restrictions-ease.html "Europe sees travel recovery as COVID restrictions ease") outpaced all expectations last quarter, while U.S consumers spent with [abandon in June as coronavirus restrictions eased – a trend likely to ensure a strong](https://www.financedigest.com/how-strong-customer-authentication-can-prevent-cart-abandonment.html "How Strong Customer Authentication can Prevent Cart Abandonment") U.S. payrolls report at the [end of this week](https://www.financedigest.com/european-shares-end-five-day-losing-streak-still-down-for-the-week.html "European shares end five-day losing streak, still down for the week").

About 89% of the nearly 300 recent U.S. earnings reports have beaten analysts’ [profit estimates](https://www.financedigest.com/ibm-beats-first-quarter-profit-estimates-signals-demand-holding-up.html "IBM beats first-quarter profit estimates, signals demand holding up"). [Earnings are now expected](https://www.financedigest.com/italian-hearing-aid-maker-amplifon-expects-higher-2023-earnings.html "Italian hearing aid maker Amplifon expects higher 2023 earnings") to have climbed 89.8% in the second quarter, versus forecasts of 65.4% at the start of July.

Key [bond yields](https://www.financedigest.com/wall-st-stocks-fall-bond-yields-rise-as-china-drops-quarantine-rule.html "Wall St stocks fall, bond yields rise as China drops quarantine rule") declined in July. Europe’s benchmark 10-year German [Bund yield](https://www.financedigest.com/euro-zone-bond-yields-rise-after-u-s-jobs-data.html) was at -0.449% at 0807 GMT, having started last month at around -0.2%.

The 10-year U.S. [Treasury yield](https://www.financedigest.com/wall-st-indexes-mixed-treasury-yields-tick-up-as-higher-rates-loom.html "Wall St indexes mixed, Treasury yields tick up as higher rates loom") was at 1.2372%, little changed on the day but having seen a gradual decline since April.

In currencies, the dollar index was down around 0.1% at 91.98, hovering just above a one-month low, while the euro was up around 0.2% at $1.18855.

The [Australian dollar](https://www.financedigest.com/asian-stocks-make-7-month-highs-australian-dollar-gains-on-hot-inflation.html "Asian stocks make 7-month highs, Australian dollar gains on hot inflation"), which is seen as a liquid proxy for risk appetite, was up 0.1%.

(Reporting by Elizabeth Howcroft; Editing by Mike Harrison)


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