European stocks gained for a third consecutive day on Wednesday as strong data from China’s services sector fuelled investors’ hopes that the global economy will stage a strong recovery from the coronavirus crisis.
Markets looked set to side-step any impact from the continued civil unrest in the US, which saw largely peaceful protestors defy curfews across the country on Tuesday night.
A closely watched survey by IHS Markit found that China’s services sector’s purchasing managers’ index (PMI) reading came in at 55.0 in May, its highest since October 2010.
Similar data from the UK and eurozone pointed to a slowing pace of contraction in the month, even if they are some way off from returning to growth.
PMIs are an indicator of private sector activity and are given on a scale of 1 to 100. Anything above 50 signals growth, while anything below means contraction.
The PMI figure, up from 44.4 in April, is reflective of strong growth in domestic business in the services sector.
Japan’s Nikkei (^N225) closed almost 1.3% in the green, reaching its highest level since late February.
“Backlogs of work fell for the third month in a row, as the Chinese economy continued its recovery from its February lockdown,” said Michael Hewson, the chief markets analyst at CMC Markets UK.
“This positive spill-over looks set to continue here in Europe, as markets extrapolate out the improvements seen in the latest China data into the rest of the world.”
Futures were pointing to a positive open for US stocks on Wednesday.