Europe midday: Stocks edge higher as euro area dodges 'cash crunch'

Stocks across the Continent are trading mostly higher come midday boosted by the release of economic data showing that the euro area appeared to have averted the 'cash crunch' that many feared in the wake of the Covid-19 pandemic.

Nevertheless, some traders and analysts remained exceedingly concerned.

"If you looked at the markets, you'd swear the economy was going through a minor blip [...] Madness," said Craig Erlam, senior market analyst at Oanda.

Sounding a not too dissimilar note, in an editorial for Bloomberg, John Authers put the recent rally down to prompt action by the Fed and excessive optimism on the part of many for whom the crisis - especially the possibility of death - now seems less immediate and close.

"[Investors] who have moved from excessive fear to over-optimistic forecasts that the disease will now disappear. That at least is the view from Washington Heights, Manhattan."

Against that backdrop, as of 1230 GMT the benchmark Stoxx 600 was drifting lower by 0.03% to 341.02, alongside a 0.38% rise for the German Dax to 10,838.34, while Milan's FTSE Mibtel was adding 0.26% to 17,723.60.

In a boost for sentiment, Chinese authorities were reportedly preparing a $565bn infrastructure investment package and overnight US tech giant Google posted better-than-expected quarterly numbers.

crude oil futures were steady alongside stocks, with June Brent higher by 5.08% at $21.5 a barrel on the ICE.

Most importantly however, M3 money supply data for March revealed an unexpected surge in growth to 7.5% year-on-year (consensus: 5.5%), in comparison to the prior month level of 5.5%.

According to Claus Vistesen at Pantheon Macroeconomics, depending on how "concentrated it was" decreased the risk of a wave of corporate bankruptcies.

"Secondly, the stronger the liquidity flow is, even as economic activity remains halted, the stronger the pent-up demand will be in H2, holding all other things equal."

But there was also a fair bit of negative news out and about.

In an unscheduled decision, ratings agency Fitch cut its rating for long-term Italian government debt to BBB- leaving it just one notch above 'junk', albeit with a stable outlook.

Fitch analysts warned Italy's debt-to-GDP ratio was set to clamber to 156% in 2020, with some other analysts pointing to even worse in 2021.

Meanwhile, in Spain, the national statistics office, INE, reported a 14.1% year-on-year collapse in retail sales for March (consensus: -4.0%) after a 1.8% during the previous month.