Europe midday: Shares extend records as Biden stimulus report drives sentiment

by | May 28, 2021

European shares pushed further into record territory on Friday, driven by reports US President Joe Biden is preparing a massive stimulus as part of his Budget package.

The pan-European STOXX 600 index rose 0.31% to 448.63 points in early trade, passing the 447.86 hit on Thursday.

Biden will propose a $6trn budget on Friday that would take the US to its highest sustained levels of federal spending since World War II as he looks to fund a sweeping economic agenda that includes large new investments in education, transportation and fighting climate change, the New York Times reported.

Documents obtained by newspaper show the budget request, the first of Biden’s presidency, calls for total spending to rise to $8.2trn by 2031, with deficits running above $1.3trn throughout the next decade.

“Further signs that the US economy is beginning to run hot prompted another switch into value stocks, at the expense of growth,” said interactive investor head of markets Richard Hunter.

“In the meantime, inflationary nerves will be tested once more as the Commerce Department releases the PCE, or Personal Consumption Expenditures, index later today. The measure tends to be one which the Federal reserve monitors closely and is more influential in deciding Fed policy than the more obvious Consumer Price Index.”

Hunter said inflationary concerns persisted as economic data “continues to point towards excess demand as growth kicks in, with supply struggling to keep pace”.

Shares rose on hopes of more liquidity, after a report said US President Joe Biden would seek $6trn in federal spending for 2022. Biden is expected to unveil his first full budget later in the day.

In equity news, shares in pharma giant AstraZeneca were down despite the company announcing its lung cancer treatment had received EU approval.

Spanish bank Sabadell fell more than 2% even after it outlined plans for more cost cuts to improve profitability.

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