Housebuilders surge as FTSE follows Chinese rally

European markets are following on from a strong overnight session, while the housebuilders help drive UK markets higher thanks to strong construction PMI and Barratt updates.   

• European markets follow Chinese lead.
• Stimulus remains key as markets outperform the economy. 
• Housebuilders surge as Barratt Developments sees strong demand. 

European markets have taken their lead from China, with the worlds second largest economy seeing a huge uptick in market speculation leading to a whopping 5.6% rise in the CSI 300. With China the first into this crisis, where their economy goes, many will hope to follow. Chinese experiences are no different to those elsewhere around the world, with easy monetary policies and government spending on the rise. Thus despite the significant fears over how the virus will continue to hold back the global economic picture, investors will hope the worldwide stimulus efforts could bring a huge recovery in time. The role of stimulus is likely to remain integral to this recovery, with a slower than expected rebound in German factory orders highlighting that the economic recovery is unlikely to mimic the sharp market momentum seen in recent months.  

The construction sector has grabbed the limelight today as a bullish outlook from Barratt Developments was bolstered by the fastest rise in construction activity for almost two-years. While the resumption of operations at Barratt certainly provided a boost, news of a healthy order book has boosted sentiment for a potential strong rebound in the second half. Post financial crisis experience has shown us that the housing sector is typically well supported in times of crisis, and hopes of a stamp duty holiday or help-to-buy extension are providing another element of hope for investors in the sector.  

Ahead of the open we expect the Dow Jones to open 346 points higher, at 26,173.