A record 18.3% GDP print from China has helped lift sentiment for European stocks, while UK airlines and banks set the positive tone for the London market.  

  • European markets lifted, as airlines outperform. 

  • Chinese growth hits record 18.3% .

  • UK banks lifted by US earnings.

European markets are hoping to end the week in a positive fashion, with record highs in US indices transmitting into position price action in both Asia and now Europe. Impressive retail sales and jobless claims figures highlight the positive impact Joe Biden’s $1.9 trillion coronavirus support package has made upon jobs and consumer spending. Despite yesterday’s strong economic data, we saw US Treasury yields tumble into one-month lows to the benefit of tech stocks. However, today we are seeing yields rise once again, hitting gold and helping to lift pro-cyclical stocks on the FTSE. Airlines are a particular standout performer in early trade today, with investors preparing for a likely reopening of international travel in a month’s time. Mondays loosening of restrictions in the UK is yet to herald a rise in Covid cases, and airlines are likely to outperform as long as those figures remain subdued.  

An overnight data surge out of China provided a fresh insight into just how the Asian powerhouse continues to lead the world out of the pandemic. Much of the reason behind today’s incredible 18.3% GDP reading is the basing effect that comes as Q1 2021 is compared with the now historic first three months of 2020. However, there is no doubt that China has led the world in both suppressing the virus and stimulating their economy to outperform throughout this pandemic. A significant part of the Chinese out performance comes through their reliance on manufacturing, which has been the benefactor of stimulus in a world of services-sector lockdowns. However, while the Chinese recovery story has been led by manufacturing, the huge 34.2% retail sales figure does highlight how consumer activity has also been a key component of the country’s impressive year. 

US earnings season continues to focus on the banks, with Morgan Stanley and BNY Mellon hoping to follow on from the impressive performance of their peers. Between improved trading performance and the decision to lessen the bad loan provisions, there is no doubt that 2020 has been better than most had expected thanks to proactive government support. Strength for the likes of Barclays, Lloyds, and NatWest highlight how traders see the same outcome for UK banks as cash set aside for bad loans are freed up. 

Ahead of the open, we expect the Dow Jones to open 14 points higher, at 34,050. 

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