European stock markets are seen opening higher Monday, helped by positive Chinese data, but gains are likely to be tentative as rising coronavirus cases continue to fan fears of further economic weakness in the region.
Data over the weekend showed an increase in profits at China’s industrial companies for the fourth consecutive month in August, suggesting that the economic recovery in the second-largest economy in the world was well entrenched.
However, expect the gains to be short-lived as expectations for economic growth in Europe and further afield falter on the back of a resurgence of Covid-19 cases.
“It is visible from card data and other high frequency measures that the case count is important for consumption, no matter whether it is rational or not,” Nordea analysts wrote in a research note. “We have another 4-6 challenging weeks ahead of us in Europe since the virus spread could further accelerate when gatherings tend to move indoors during the autumn.”
Investors will also be keeping a wary eye on the latest Brexit talks, with the final round of scheduled discussions between the EU’s chief Brexit negotiator, Michel Barnier, and his British counterpart, David Frost, beginning in Brussels on Tuesday.
The first debate between U.S. President Donald Trump and rival Joe Biden also takes place on Tuesday ahead of the November election, while any progress on a new fiscal support package in the United States will also be of interest. The New York Times published an in-depth analysis of Trump’s leaked tax returns on Sunday evening, which documented years of losses at many of his golf courses and hotels.
In corporate news, ArcelorMittal (NYSE:MT), the world’s largest steelmaker, is likely to be in the spotlight after Cleveland-Cliffs (NYSE:CLF), the largest U.S. producer of iron ore pellets, agreed to buy its U.S. assets for about $1.4 billion..
The semiconductor sector is also likely to be in focus after the U.S. imposed export restrictions on China’s largest chipmaker, Semiconductor Manufacturing Intl Co. (SS:688981)
SMIC is now the latest Chinese tech company, alongside Huawei, ByteDance and Tencent Holdings (OTC:TCEHY), to be caught in the crossfire between the U.S. and China.
Oil prices weakened Monday, with the major oil benchmarks on course to end the month lower, for the first time in many months, as rising coronavirus cases threaten hopes of a recovery in demand.
U.S. crude futures traded 1% lower at $39.86 a barrel, while the international benchmark Brent contract fell 0.9% to $42.03. Brent is on track for its first monthly loss in six while WTI is headed for its first monthly drop since April.