European stocks rose yesterday, boosted by positive earnings updates from Barclays and a surge in Airbus, but nagging worries about the economic impact of surging Covid-19 cases saw markets post their biggest weekly decline in a month.
Breaking a four-day losing streak, the pan-European STOXX 600 index advanced 0.6%, with London’s FTSE 100 outperforming its European peers after Barclays jumped 7% on strong results.
That lifted regional banks, putting them on course for their best monthly performance in over a year.
Other sectors considered more economically sensitive such as automakers and oil & gas also found favour.
“Better than expected results from Barclays triggered renewed interest in banking shares, most of which are trading on depressed levels so value investors will be particularly interested,” said Russ Mould, investment director at AJ Bell.
Meanwhile, data yesterday showed eurozone economic activity fell this month, while the German manufacturing sector expanded at a faster rate in October.
But the German services activity shrank, suggesting Europe’s largest economy is operating at two speeds.
“Opposite forces are in play at the moment,” said Emmanuel Cau, head of European equity strategy at Barclays. “Globally you’ve these two main sources of growth – US and China – that are still recovering, so part of the European market will still benefit from the strength outside of Europe.”
“But the domestic part of the market exposed to mobility and restrictions are impacted by the second wave.”
Surging Covid-19 cases in the region have led to more curbs of late, with France looking set to widen a curfew to more than two thirds of its population.
Finance Minister Bruno Le Maire said GDP will likely contract in the fourth quarter, adding that curfew measures would cost around 2bn euros ($2.36bn). With some optimism this week stemming from new fiscal stimulus in the UK, markets now look to the European Central Bank meeting next week when analysts expect the bank to signal policy support in December.
Globally, the mood was one of caution with less than two weeks to go before the US presidential election.
Planemaker Airbus jumped 5.6% after it told suppliers to be ready for an output hike once demand recovers from the coronavirus crisis.
Luxury group Kering fell 3.2% as its star Gucci brand underperformed rivals.
Swiss engineering company ABB was among the biggest drags on the STOXX 600 after saying it expects its orders and revenue to remain under pressure for the rest of 2020.
New York opened flat and then slipped back, with company results a mixed bag that produced some sharp share price losses – Intel was down 11%. The markets are watching closely to see if, as seems to be the case, the upward momentum of the third quarter slows in the final quarter of the year as governments introduce new restrictions to tame the upsurge in the pandemic.
Investors appeared largely unmoved by the final presidential debate between Donald Trump and Joe Biden before the November 3 vote.
Democratic House Speaker Nancy Pelosi said both parties “continue to be engaged in negotiations, and I am hopeful we will be able to reach an agreement.”
Pelosi has sought this week to pin down a deal with Republican President Trump’s Treasury Secretary Steven Mnuchin even as Senate Republicans remain unconvinced.
“Stock markets (are) getting a bit of a boost into the end of the week as Mnuchin and Pelosi work towards a stimulus package,” said OANDA analyst Craig Erlam.
“Given the opposition among Republican senators to the large package that the White House and House Democrats are negotiating, it would seem as if the markets are more focused on the likelihood (of a deal) later,” said Karl Haeling of LBBW.
Bets on a Biden win and a Democratic sweep of both houses of Congress have risen recently, with the consensus being that such an outcome would see the passage of an even bigger stimulus than the one of around $2tn being discussed now.
In London, the FTSE 100 closed up 1.3% to 5,860.28 points; Frankfurt – DAX 30 ended up 0.8% to 12,645.75 points; Paris – CAC 40 closed up 1.2% to 4,909.64 points and EURO STOXX 50 ended up 0.7% to 3,193.03 points yesterday.
Traders monitor data on computer screens at the Frankfurt Stock Exchange. The DAX 30 closed up 0.8% to 12,645.75 points yesterday.
