European stocks largely sought firm direction Thursday, but French blue-chip shares climbed as data showed the country was a key contributor to strengthening activity in the eurozone’s economy this month.
How key gauges are moving: The Stoxx Europe 600 SXXP, -0.01% was up less than 1 point at 387.14 in what’s been a topsy-turvy session for European equities. The index has risen as much as 0.2% and has lost as much as 0.6% intraday. The financial and utilities sectors were in the red but industrial and technology shares led advancers.
Volumes were expected to be lower as U.S. markets are closed for the Thanksgiving Day holiday. On Wednesday, the Stoxx 600 fell 0.3%, snapping a two-day run of gains.
In Paris, the CAC 40 PX1, +0.51% sloughed off losses and rose 0.6% to 5,383.04.
In Frankfurt, the DAX 30 index DAX, -0.19% has moved between gains and losses and recently shed 0.1% to 12,996.31. Attention was turning to whether Germany Chancellor Angela Merkel would form a grand governing coalition with the Social Democratic Party, led by Martin Schulz.
The euro EURUSD, +0.2114% bought $1.1846, up from $1.1824 late Wednesday in New York.
What’s driving markets: Major equity benchmarks either pared losses or turned higher as the session wore on after a preliminary reading on eurozone economic activity exceeded expectations. Figures showed Germany’s economic growth had expanded and French manufacturing confidence hit a decade high.
Stocks opened lower, with the euro strength acting as a headwind and as investors assessed the worst selloff in Chinese equities in about three months.
The euro started to leap late Wednesday as the U.S. dollar DXY, -0.13% was yanked down by investors who questioned the potential pace of U.S. interest-rate hikes. Minutes released from the Federal Reserve’s meeting this month showed policy makers have grown more concerned about persistently low inflation levels.
A stronger euro can make products from European exporters more expensive to purchase for their overseas clients who use other currencies, so a rising euro can put pressure on shares of such companies.
The trading session also got underway with traders seeing there was a rout in Chinese equities that left the Shanghai Composite SHCOMP, -2.29% and the Shenzhen Composite 399106, -2.92% down 2.3% and 2.9%, respectively.
The selloff was sparked as Beijing took steps to halt the proliferation of small online lenders after saying it plans to streamline oversight of asset-management products sold by financial institutions.
What strategists are saying: Traders “are keeping an eye on the outcome of the meeting between [German] President Steinmeier and SPD leader Schulz,” said Naeem Aslam, chief market analyst at Think Markets, in a note.
“German party leaders do feel that they have a responsibility to form a government and the SPD leader has said that he is open for another round of talks with Merkel,” he said. “If we do see more tangible progress which helps Merkel to finally form a coalition, we do think that the euro could move higher and the EUR/GBP could surpass the mark of £0.90.”
“The German economy is currently showing its best performance over such a long period since the mid-1990s,” said Carsten Brzeski, chief economist at ING, in a note.
“In the short term, the impact from the current political impasse on the German economy should be (close to) zero,” he said. “For the longer term, however, given the lack of structural reforms and the urgent need for investments in digitalization and education, German politicians should not waste too much time if they don’t want to put the economy’s future at risk.”
Stock movers: Centrica PLC shares CNA, -15.62% plunged 15% to the bottom of the Stoxx 600, after the parent company of British Gas warned that its energy supply businesses have had a disappointing second half. It also gave a full-year adjusted earnings outlook that was below the market consensus.
Thyssenkrupp AG TKA, +2.37% rose 2% as the German conglomerate’s fiscal 2017 adjusted earnings before interest and taxes rose 30% to €1.91 billion, exceeding a FactSet consensus forecast of €1.74 billion.
Altice NV shares ATC, +5.28% jumped 5.8% following a Financial Times report that the French telecommunications company is seeking to sell its telecom network in the Dominican Republic.
Economic data: A purchasing managers index for the eurozone rose to 57.5 in November from 56.0 in October, reaching its highest level in more than six years, said data firm IHS Markit. Economists widely expected an unchanged reading. France contributed to the upside surprise as its services sector PMI jumped to 60.2 from 57.3.
Germany’s Destatis statistics agency said Thursday. Gross domestic product grew at a quarter-to-quarter rate of 0.8% in the three months through September, or 3.3% in annualized terms, confirming preliminary growth estimates.
France’s statistics bureau Insee said its monthly measure of manufacturing confidence rose one point to 112 in November, in line with economists’ expectations as well as setting a fresh decade high.