European stocks rallied on Wednesday and remain steady in Thursday trading despite a huge selloff in US stock markets. The rally in stock prices of sportswear makers and auto companies helped European stocks to extend the upside momentum.

European stocks rallied as traders have ignored slowing economic recovery data. The business activity dropped in September both in Europe and the UK based on IHS Markit data.

The purchasing manager’s index (PMI) of the European Union dropped to 50.1 points in September compared to 51.9 points in August. The UK purchasing manager’s index fell to 55.7 from 59.1 in the previous month.

“PMIs underline the fragility of the recovery,” said Neil Wilson, chief market analyst at Markets.com. “The manufacturing sector can sustain recovery as firms can work out how to function in the new environment, but it’s harder for many service sector businesses to operate at all, which drags on the number,” he added.

The US stock markets, on the other hand, extended losses as Fed chairman Jerome Powell predicted that the US economy could grow at a slower pace. The chairman urges lawmakers to work on new stimulus programs to support the domestic economy.

The markets are likely to come under pressure in the days to come because the second coronavirus wave has forced European leaders to rethink social distancing measures.

UK prime minister has announced new restrictions on pubs and bars to avoid the threat of virus spread.

Asian markets traded lower on Thursday as US stock futures are in red due to Fed’s warnings.

US dollar index kept the upside momentum, while euro and Asian currencies fell in Thursday trading. USD index currently trades around 94.40 levels against the basket of six major currencies. Gold price also extended losses amid equities selloff and the strengthening US dollar.