European shares rose on Wednesday, boosted by a sharp rise in Just Eat Takeaway shares after Amazon agreed to take a stake in the company’s Grubhub unit, as well as stronger-than-expected German industrial data.
The regional Stoxx Europe 600 index rebounded from sharp declines in the previous session to rise 1.5 percent by late morning. Germany’s Dax added 1.4%, while London’s FTSE 100 gained 1.6%.
The Stoxx closed 2.1 percent lower on Tuesday, hit by worries about a looming economic slowdown and the possibility that Norwegian gas supplies could be constrained by a labor strike. The Norwegian government intervened late Tuesday to end the action.
The market moves on Wednesday came as Just Eat Takeaway and Amazon announced US trade agreement, which saw Amazon agree to take a 2% stake in Just Eat’s US Grubhub business, giving Amazon Prime members access to the food delivery platform. Shares in Just Eat, which has a market capitalization of €3 billion, rose 17 percent.
Helping to bolster sentiment after the previous day’s selloff, new data showed that German industrial orders unexpectedly rose 0.1 percent in May after falling 1.8 percent in April. Economists polled by Reuters had forecast a 0.6 percent decline.
But Sharon Bell, senior European equity strategist at Goldman Sachs, warned that “more consistent data shows that Germany is weakening in this modest decline”, adding that the latest swings show that “volatility in the markets is high right now: there is a lack of of confidence [among investors] as to what positions to hold’.
In Asian stock markets, Hong Kong’s Hang Seng lost 1.2 percent as new Covid-19 outbreaks fueled recession fears.
U.S. government debt markets were steadier on Wednesday, but the yield on the two-year Treasury note continued to trade above that of the 10-year note after reversing for the third time this year on Tuesday. So-called inversions, when yields on 10-year Treasuries fall below their shorter-dated counterparts, have preceded every U.S. recession in the past half-decade.
In a further indication of recession fears, the dollar jumped to a new 20-year high on Tuesday, while the euro fell. The dollar index, which measures the U.S. currency against a basket of six others, added 0.2 percent in late morning European trade.
Expectations of an economic slowdown pushed Wall Street’s tech Nasdaq Composite higher on Tuesday, sending it to close up 1.7 percent as investors flocked to companies such as Amazon owner and Facebook Meta, which are generally expected to maintain earnings growth by time of market stress.
Aggressive monetary tightening has hit the valuations of tech companies this year, with the prospect of higher interest rates biting into their projected cash flows and earnings.
But helping those groups, fears of a slowdown in recent weeks have dampened investors’ expectations of how much the US Federal Reserve will raise interest rates. Markets are now pricing in a benchmark rate of 3.3% through February 2023, down from expectations of 3.9% just over three weeks ago.
Futures tracking the U.S. S&P 500 added 0.1% on Wednesday morning, as did those tracking the Nasdaq 100. Details from the Fed’s latest monetary policy meeting, due later on Wednesday, could provide additional indications of the extent to which the central bank is prepared to tighten amid the economic gloom.
In commodity markets, Brent crude rose 1.1 percent to $103.91 a barrel after the international oil benchmark fell nearly 10 percent on Tuesday. West Texas Intermediate, the U.S. benchmark, rose 0.2 percent to $99.72 after falling below $100 on Tuesday for the first time since May.
The pound lost 0.1 percent against the dollar on Wednesday after Rishi Sunak resigned as UK chancellor on Tuesday and Nadhim Zahawi was appointed as his replacement.