The FTSE 100 (^FTSE) gained ground on Wednesday as volatility continued to grip markets amid fears about soaring inflation and an economic downturn.
London’s benchmark index rose 0.5% after opening, while the CAC (^FCHI) advanced 0.6% in Paris, and the Frankfurt DAX (^GDAXI) was also 0.6% higher.
It came as the German economy grew in the first quarter of the year, shrugging off the impact of the Ukraine war and the pandemic.
According to official data, GDP in Europe’s largest economy grew 0.2% quarter-on-quarter, and 3.8% on the year. This followed a 0.3% decline at the end of last year.
Georg Thiel, president of the statistics office, said: “Despite the difficult global economic conditions, the German economy started the year 2022 with slight growth.”
Elsewhere, the pound recovered from its low against the dollar (GBPUSD=X), trading back above $1.25.
“Fears about the fragility of the UK economy look set to keep sterling under pressure after the much weaker than expected PMI data showing a marked slowdown in business activity,” Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said.
“This has led to expectation that the Bank of England (BoE) will be forced to ease off on the accelerator when it comes to higher interest rates with the market now expecting fewer hikes.”
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Across the pond on Wall Street, S&P 500 futures (ES=F) were up 0.5%, Dow futures (YM=F) rose 0.3%, and Nasdaq futures (NQ=F) were 0.7% higher as trade began in Europe.
US markets had another choppy session on Tuesday, with the Nasdaq leading the moves lower.
“Yesterday’s US economic data didn’t help the wider attitude to risk, with a weaker than expected services PMI report, while new home sales tanked by -16.6% in April, and the March number was revised lower to -10.5%, highlighting the impact that rising rates have had on the US housing market, with declines in sales every month this year,” Michael Hewson of CMC Markets said.
“This data deterioration is being reflected in US bond markets, which have seen further weakness in yields, suggesting that investors are becoming more concerned about stagflation/recession than they are about inflation.”
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Traders will also be looking ahead to the publication of the latest set of Federal Reserve minutes after it raised rates by 50bps earlier this month, pushing the upper bound of the Fed funds rate to 1%.
Asian stock markets were mixed overnight after Wall Street sank on weak US housing sales and a profit warning by social media firm Snap (SNAP), which sent the stock 43% lower on the day.
In Japan, the Nikkei (^N225) fell almost 0.3% while the Hang Seng (^HSI) rose 0.6% in Hong Kong and the Shanghai Composite (000001.SS) climbed 1.2%.
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