The flight to value remains in play, as markets push higher despite US-focused concerns. Hammerson gains over 80% as bricks-and-mortar retail looks set to reopen. Chinese services PMI bolsters confidence of future rebound globally.

  • Markets remain blinkered as value continues to drive upside

  • Hammerson surges as retail gets a boost

  • Chinese services sector rebounds, providing potential guidance for UK pathway

Traders are greeted with another sea of green in Europe this morning, as markets continue their relentless gallop higher. Protests throughout the US, and fears over a potential breakdown in US-China relations have been largely cast aside in favour of an incredible move towards risk assets. That drive to value has seen some of the hardest-hit firms stage a dramatic resurgence, with airlines, energy, and banking stocks leading the way for the FTSE 100.

However, it is the FTSE 250 which has had some surprising winners, with an early 21% rebound for retail property developer Hammerson taking the weekly performance to a whopping 84%. For all the talk of the digitalisation of shopping habits, the planned reopening of Hammerson's flagship locations in less than two weeks has caught many off-guard. Ultimately this recent rebound for value has been borne out of an overwhelming optimism in anticipation of reopening measures throughout Europe. However, with UK covid deaths substantially higher than many of their mainland European counterparts, it should come as no surprise when UK stock market gains are outpaced by their neighbours. The big risk for markets comes in the form of a second wave, and the recent deterioration in social distancing certainly does pose a risk that we will see restrictive measures reimposed to the detriment of value stocks.

Overnight data from China has helped bolster confidence of an economic rebound in the region, after the Privately compiled Caixin services PMI reading jumped into strong expansion. China provides a leading gauge of where the likes of Europe and the US could be if a similar path is taken. However, traders should be cautious given that this rise back into expansion does simply highlight month-on-month improvements rather than making any relative comparison to pre-crisis levels. Nevertheless, with the Chinese services sector growing sharply in May, there is a hope that we will see something similar in the UK once businesses can reopen.

Ahead of the open we expect the Dow Jones to open 133 points higher, at 25,876.

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