European stocks lifted by surprise rise in Chinese exports

By Sruthi Shankar

(Reuters) – European shares rose on Thursday as a surprise rise in China’s exports overshadowed another set of grim results and a warning from Air France-KLM that demand could take “several years” to recover.

The pan-European STOXX 600 <.STOXX> rose 0.6%, led by gains in retail <.SXRP>, mining <.SXPP> and real estate <.SX86P> sectors <.SXMP>.

German online fashion retailer Zalando jumped 10.2% after saying it was recovering from an initial hit by coronavirus lockdowns and it expects a return to profitability as it posted a first-quarter loss.

The mood stabilised globally as Beijing reported a 3.5% rise in April exports, confounding market expectations for a sharp fall, as factories restarted production after the coronavirus pandemic.

“Market reaction has generally been driven by things not getting any worse,” said Will James, deputy head of European equities at Aberdeen Standard Investments in London.

“There’s probably a bit of danger to extrapolate a similar path of recovery within Europe and elsewhere because in China, the state is very heavily involved.”

Despite forecasts for a record 7.7% contraction for the euro zone economy this year and a 14% plunge in Britain’s economy, European shares have held near two-month highs on hopes that easing lockdowns will spark a rebound in economic activity.

However, the threat of a renewed Sino-U.S. trade spat has weighed on sentiment. U.S. Secretary of State Mike Pompeo renewed his aggressive criticism of China on Wednesday, blaming it for the deaths of thousands of people from the coronavirus.

Some disappointing earnings forecasts also cast a shadow, with Air France dipping 3.8% as it predicted operating losses to widen “significantly” in April-June quarter, with 95% of flights expected to remain grounded.

British Airways-owner IAG fell nearly 2.8% after it warned that passenger demand would not return to previous levels until 2023, and it would seek to defer deliveries of 68 aircraft.

Britain’s largest telecoms group BT tumbled 7.1% and was the biggest decliner on the FTSE 100 <.FTSE> after it suspended its dividend until 2021-22 and pulled its financial outlook in response to the COVID-19 pandemic.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Anil D’Silva, Bernard Orr)