StockBeat: Chipmakers, Banks Lead Modest Recovery Ahead of Weekend

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By Geoffrey Smith

Investing.com -- Europe’s stock markets were on course for a happy ending to a volatile week Friday, as positive leads from Wall Street and Asia combined with suggestions of fiscal support measures from China combined to put a floor under equities.

By 5 AM ET, the benchmark Stoxx 600 was up 1.1% at 368.94, while the German Dax and French CAC 40 were up 1.0%. They’re still all on course for a weekly loss, however.

The FTSE 100 was up a more modest 0.6%, reflecting a bounce in sterling on rising hopes that parliament will be able to stop a No-Deal Brexit through a vote of no confidence in the government of Boris Johnson, a measure that could theoretically be followed by the creation of a ‘government of national unity’.

Chipmaker stocks led the way, in the wake of better-than-expected quarterly results released late Thursday by NVIDIA (NASDAQ:NVDA), which supported hopes that the slump in demand for high-performance chips could be ending. Germany’s Infineon Technologies (DE:IFXGn) rose 2.2%, while STMicroelectronics (A:STM) rose 0.7% and Dutch-based ASML (AS:ASML) rose 1.5%.

Banks were also prominent among the gainers after a torrid week. Spain’s largest banks all rose by between 1% and 1.5% and Germany’s Commerzbank (DE:CBKG) and Deutsche Bank (DE:DBKGn) rose 3.3% and 1.5%, after both hitting new all-time lows this week on fears of endlessly low interest rates.

Markets derived some support from overnight comments from China’s state planning commission about a possible plan to support household incomes next year, which lifted Asian equities earlier.

The growing prospects for fiscal stimulus across the globe mean that there’s “still substantial potential for equities”, Deutsche Bank (DE:DBKGn) strategist Ulrich Stephan said in a note to clients.

He pointed to comments by European Central Bank governing council member Olli Rehn on Thursday stressing the need for the ECB to exceed market expectations when it delivers its long-awaited package of monetary easing measures in September.

Stephan also pointed to the increasing pressure within Germany for the government to abandon its principle of balanced budgets.

There has been growing talk of government investment packages to upgrade Germany’s environmental performance or its infrastructure, accompanied by various ideas on how and when to abolish a reunification-era surcharge on income tax. However, none looks close to fruition and the government is constrained by a constitutional amendment limiting the structural budget deficit to only 0.35% of gross domestic product.

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