By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — European stock markets climbed, nearly reaching a six-week high on Monday, with banks and resource firms in the lead after growth data from China met analysts’ expectations and calmed fears of a sharp economic slowdown in the country.
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP +1.11% gained 0.4% to close at 297.38, after closing out Friday with a 2.7% weekly gain.
French supermarket company Carrefour SA /zigman2/quotes/208564127/delayed FR:CA +2.94% picked up 1.9% after analysts at Barclays lifted the firm to overweight from equal weight.
The broader European stock markets mirrored gains in Asia, where Chinese stocks had a strong trading day after the release of gross-domestic-product data on China. The National Bureau of Statistics said the economy grew 7.5% in the second quarter, weaker than the 7.7% expansion recorded in the first quarter, but matching expectations in separate surveys of economists by Dow Jones Newswires and Reuters.
The report came after China’s Finance Minister Lou Jiwei on Friday suggested the country’s economy would fall short of its targets and that the growth rate could average 7% this year, according to Xinhua news agency. The agency, however, over the weekend corrected the 7%-growth comments.
China's economic rebalancing issues
China is finding it hard to rebalance its economy. But when it happens, the country’s growth rate is likely to come in at around half the 7% rate most pundits seem to be penciling in.
“The Chinese finance minister on Friday tried to guide the market expectations lower by saying that growth was going to be a little slower this year, so markets were relieved when the data came out today,” said Richard Perry, chief market strategist at Central Markets in London.
“But if we look at the fact that Chinese growth is still falling, it’s not a massive positive reading. I think markets are taking it a little too positive, especially at the open,” he added.
Resource firms, which tend to rise on solid growth expectations from China, advanced in Europe after the data.
In the U.S., shares posted cautious gains after a record climb last week.
Data showed retail sales in the U.S. in June climbed 0.4%, well below the 0.9% expected by economists polled by MarketWatch. Additionally, the Empire State manufacturing survey rose in July for a second month.
“Economic data from the U.S. wasn’t great but since Fed Chairman Ben Bernanke’s comments last week that the central bank will maintain a highly accommodative easing stance, bad news from the U.S. is again being viewed as good news,” said Ishaq Siddiqi, market strategist at ETX Capital, in a note.
Bernanke sent financial stock markets tumbling from multiyear highs in May when he expressed the central bank could start scaling back its $85-billion-a-month asset purchases if the economic data continue to improve.
In France, the CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 +0.90% rose 0.6% to 3,878.58, shaking off a sovereign ratings downgrade from late Friday. Fitch Ratings downgraded the country’s credit rating to AA+ from AAA, citing the high level of government indebtedness of the euro-zone nation.
Banks posted some of the biggest gains in Paris, with shares of Société Générale SA /zigman2/quotes/206663756/delayed FR:GLE +0.72% up 1.4% and BNP Paribas SA /zigman2/quotes/206351084/delayed FR:BNP +0.89% 1% higher.
Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX +0.86% added 0.3% to 8,234.81, after putting in its best weekly performance since early December 2011 last week.
Shares of Commerzbank AG /zigman2/quotes/200193353/delayed DE:CBK +1.67% jumped 4.7% after the bank said it has sold U.K. commercial real estate loans worth around 5 billion euros ($6.52 billion) to a U.S. consortium.
In Portugal, the PSI 20 index /zigman2/quotes/210598164/delayed PT:PSI20 +1.07% climbed 0.8% to 5,406.18, as the three main political parties set a deadline for agreeing on the “national salvation pact” called for by President Anibal Cavaco Silva last week.
The index lost 1.1% on Friday as 10-year government bond yields surged more than 50 basis points to above 7% amid political instability. On Monday, the 10-year yield dropped 35 basis points to 7.16%, according to electronic trading platform Tradeweb.