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Europe midday: Miners at three-month highs as gold and silver break higher

Wed 05 August 2020 12:19 | A A A

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6007.05 | Negative 42.87 (0.71%)

Prices delayed by at least 15 minutes

(Sharecast News) - Stocks on the Continent are holding higher as miners' shares push to three-month highs and thanks to positive corporate updates and some better-than-expected economic data.

Driving the former higher were the dizzying gains in gold and silver alongside, prompting cautious comments from some analysts, either around the robustness of the recovery or the ongoing tensions between the US and China.

For his part, IG's Chris Beauchamp said: "That both equities and the supreme risk-off asset are moving higher just shows how conflicted investors are - they can't avoid being tempted by equities, but they can also read the unending stories of bankruptices, such as Virgin Atlantic in the US this morning, and the litany of job losses, with WHSmith becoming the latest High Street firm to cut roles, and thus can see the appeal of gold."

As of 1245 BST, the pan-European Stoxx 600 was ahead by 0.73% to 366.05, alongside a 0.78% advance for Germany's Dax to 12,698.29 while the FTSE Mibtel was ahead by 0.57% to 19,725.31.

In parallel, euro/dollar was up 0.42% to 1.1852 while front-dated Brent was up 3.65% to $46.05 per barrel on the ICE.

But the biggest gains in commodities, in comparison to a typical day, were arguably among gold and silver futures which were bounding ahead by 1.78% and 3.96% to trade at $2,057.0/oz. and $27.06/oz., respectively.

Pushing commodity prices higher was the recent drop in inflation-adjusted or 'real' interest rates, said strategists at Bank of America, who earlier in the session hiked their 18-month target for gold prices from $2,000/oz. to $3,000/oz..

Among equities meanwhile, IAG, Easyjet and Lufthansa remained near the top of the leaderboard for the Stoxx 600, pushing a gauge for the sector up by 2.2%.

But Basic Resources was faring best, climbing 2.36%, while another sector sub-index for Oil&Gas had strengthened 2.32%.

Commerzbank was a standout gainer as well following the release of better-than-expected second quarter profit of €220m, including a lower-than-expected forecast for full-year loan-loss provisions although management did drop its forecast for full-year profits.

Another V spotted in the Eurozone data, some analysts say

Retail sales volumes in the euro area were reported by Eurostat at up by 1.3% year-on-year for June after a 3.1% drop in May (consensus: -0.2%).

"Overall, these data have been very strong in the past few months. The rise in June left retail sales 0.2% above its pre-crisis level at the end of Q2, which is impressive," said Pantheon Macroeconomics's Claus Vistesen.

Nevertheless, Vistesen expected a "bumpier" ride going forwards.

IHS Markit's euro area services sector Purchasing Managers' Index meanwhile printed at 54.7 for July, up from 48.3 in the month before (Flash: 55.1).

The composite output index meanwhile came in at 54.9, against 48.5 for July (Preliminary: 54.8), but only due to the faster than expected recovery in factory output during the same month.

Chris Williamson, chief business economist at IHS Markit, said that Wednesday's readings bode well for a rebound in third quarter activity levels.

But he added: "even without a significant increase in infections, social distancing measures will need to be in place until an effective treatment or vaccine is available, dampening the ability of many firms to operate at anything like pre-pandemic capacity, and representing a major constraint on longer-run economic recovery prospects."

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