European equities started December on a bright note, following a record November, after encouraging Chinese factory data prompted investors to look ahead to a global economic recovery.
The benchmark Stoxx 600 index rose 0.7 per cent in the first hour of trading, having gained almost 14 per cent in November. The UK’s FTSE 100, which on Monday closed its best month since 1989, opened 1.6 per cent higher. Germany’s Dax added 0.9 per cent.
This followed gains in Asia after a survey run by Chinese publication Caixin found industrial activity in November in the world’s second-largest economy was accelerating at its fastest pace in a decade. Hong Kong’s Hang Seng index rose 0.9 per cent and Japan’s Nikkei 225 1.3 per cent.
“This validates the idea that, when you get the pandemic under control and you really manage to keep it low, economies can catch up extremely rapidly,” said Samy Chaar, chief economist at Lombard Odier.
Mr Chaar added that the composition of Joe Biden’s proposed administration signalled positive prospects not only for fiscal and monetary stimulus but also for a “progressive and gradual winding down” of pandemic emergency schemes that would not overly disrupt financial markets. Former Federal Reserve chair Janet Yellen has been nominated to run the Treasury department.
The Caixin purchasing managers’ index produced a reading of 54.9 for last month, which was comfortably above the 50-level that separates growth from contraction and better than the expectations of economists polled by Reuters. This echoed similar findings from a government survey published on Monday.
Shares in economically and trade-sensitive companies were the best performers in Europe on Tuesday, with banks, energy producers and carmakers all rising.
Futures markets signalled a strong day on Wall Street. Contracts wagering on the direction of the blue-chip S&P 500 index gained 0.9 per cent while those on the technology-focused Nasdaq added 0.7 per cent.
Haven assets, which investors turn to in times of economic stress, continued to underperform. The dollar, as measured against a basket of trading partners’ currencies, hovered around its lowest since April 2018. Gold rose by less than 1 per cent to $1,793 a troy ounce but remained around its lowest since early July.
The Vix, which measures investors’ expectations of share price volatility on the S&P 500, fell to a reading of 20.2, its lowest since late February.
Brent crude, the international oil benchmark, slipped 0.3 per cent to $44.74 a barrel, having gained 27 per cent during November.