By Callum Keown
European stocks climbed on Friday as signs of a recovery in China helped boost sentiment after a strong finish on Wall Street.
However, those gains were trimmed and U.S. stock futures turned lower on reports that the U.S. Commerce Department was taking steps to block shipments of semiconductors to Huawei.
The department is amending a rule to “strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology,” Reuters reported.
The pan-European Stoxx 600 /zigman2/quotes/210599654/delayed XX:SXXP +1.11% index climbed 0.4%, while the German DAX /zigman2/quotes/210597999/delayed DX:DAX +0.86% rose 1% and the French CAC /zigman2/quotes/210597958/delayed FR:PX1 +0.90% fell 0.1%, losing earlier gains. The FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +2.04% rose 1% as it clawed back some of Thursday’s losses and the more domestically-focused FTSE 250 /zigman2/quotes/210598417/delayed UK:MCX +0.51% was 1.7% up. After making initial gains Dow /zigman2/quotes/210407078/delayed YM00 +0.05% futures were 0.6% down before the open, while S&P 500 futures /zigman2/quotes/209948968/delayed ES00 +0.01% fell 0.6% and Nasdaq futures /zigman2/quotes/210219788/delayed NQ00 -0.0067% slipped 0.4%.
What’s moving the market?
European stocks moved higher early on Friday following a strong finish on Wall Street and encouraging factory data from China.
U.S. stocks staged a dramatic late recovery on Thursday, helped by financial stocks, on signs of recovering in demand as some states emerged from lockdown. The Dow Jones Industrial /zigman2/quotes/210598065/realtime DJIA +1.05% closed 377 points, or 1.6% higher, after an 800-point turnaround. The rally came despite data showing 2.9 million Americans lost jobs last week, taking the total above 36 million during the coronavirus crisis.
Stronger signs of a recovery in China kept the positive sentiment going as industrial output rose 3.9% in April, beating economists’ forecasts of a 1% rise, the first monthly rise this year. However, retail sales fell 7.5%, worse than a consensus 7% drop but an improvement on the 15.8% slump in March. However, reports of the U.S. Commerce Department moving to block shipments to Huawei soured sentiment.
CMC Markets analyst Michael Hewson said that despite the improved data, China’s recovery progress should act as a “warning.”
He said: “While we saw some nuggets of an improvement in the latest China data, the fact that retail sales numbers were still sharply negative for the third month in a row, should act as a warning to those hoping for a swift rebound in economic activity as lockdown measures here are loosened, that any recovery is likely to be slow and hard won.”
German gross domestic product shrank by 2.2% in the first quarter, the Federal Statistical Office said on Friday — its sharpest contraction since the financial crisis but in line with expectations. As the German economy went into lockdown in mid-March, the second quarter is expected to be worse.
Stocks to watch
BT /zigman2/quotes/209006687/delayed UK:BT.A +1.05% shares soared on reports the telecom giant is in talks to sell a £20 billion stake in Openreach — its division that runs the U.K.’s broadband network. The company’s shares tumbled last week after it suspended dividends until 2022 to free up cash for the 5G rollout and fiber broadband expansion.
Travel stocks rebounded sharply on Friday after heavy losses earlier this week, as sentiment over a recovery improved. Cruise operator Carnival /zigman2/quotes/210414141/delayed UK:CCL -5.10% climbed 7.9%, budget airline easyJet /zigman2/quotes/202825892/delayed UK:EZJ -2.01% rose 6.9% and hotel chain InterContinental Hotels Group /zigman2/quotes/202865596/delayed UK:IHG -0.29% jumped 2.6%.