Investing.com | Jul 16, 2020 07:05
By Peter Nurse
Investing.com - European stock markets are seen opening lower Thursday, amid caution over the pace of the global economic recovery ahead of the latest meeting from the European Central Bank.
China reported 3.2% growth in its second quarter GDP year-on-year earlier Thursday, as the world’s second-largest economy returned to growth after the first quarter’s contraction of 6.8%.
But the recovery is still uneven. Separate data showed China's industrial output beat expectations in June, but retail sales unexpectedly fell again, suggesting consumer demand remains weak.
“Although the quarter-on-quarter growth of 11.5% supports the V-shaped recovery narrative, which financial markets have been trading on, year-on-year growth of 3.2% is still the lowest since records began in 1992,” said analyst Amy Yuan Zhuang at Nordea, in a research note. “It suggests that economic activity remains far below the pre-pandemic levels.”
At the same time, the Covid-19 virus continues to work its way through the global population, with the summer tourism season in Europe generating pockets of high-risk gatherings. Tensions between the U.S. and China are also still simmering.
“Lingering uncertainty could prolong the recovery and make the asset price rebound fragile to a correction,” the analyst at Nordea added.
Attention will now turn to the latest ECB get together, although the central bank is unlikely to deliver another easing package so soon after June’s largesse.
“We think the ECB will strike a more positive note on current economic developments, while continuing to express caution about the outlook further out,” said analysts at ABN Amro, in a research note.
In corporate news, Novartis (SIX:NOVN)will be in focus after the Swiss pharma giant said it will offer medicines on a zero-profit basis to financially-strained countries to help treating Covid-19 patients.
Oil prices weakened Thursday after the world’s major producers agreed to relax their record cuts to output, but losses have been mitigated by a sizable drop in last week’s official U.S. crude inventories.
The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, agreed on Wednesday to scale back oil production cuts from August to 7.7 million barrels a day until December, from the 9.7 million barrels per day seen since May. The Energy Information Administration, meanwhile, reported U.S. crude inventories fell 7.5 million barrels last week, much morethan expected.
At 2:05 AM ET, U.S. crude futures traded 0.8% lower at $40.86 a barrel, while the international benchmark Brent contract fell 0.7% to $43.40.
Written By: Investing.com
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