LONDON (Reuters) – European stocks rose on Thursday as better-than-expected corporate earnings offset concerns over mounting COVID-19 cases and a sharp escalation in tensions between the United States and China.
FILE PHOTO: The London Stock Exchange Group offices are seen in the City of London, Great Britain, on December 29, 2017. REUTERS / Toby Melville
Shares rose to their strongest levels since February this week, in many countries erasing all their slumps in March when the coronavirus pandemic sent the markets into a free fall, while investors bet that a massive stimulus has led to economies to the worst.
The pan-regional Euro Stoxx 50 rose 0.42%, while the German DAX gained 0.43% and the FTSE 100 by a similar margin.
S&P mini futures added 0.29%, pointing to a stronger open on Wall Street.
The MSCI global equity index, which tracks stocks in 49 countries, rose 0.2%, close to Tuesday’s level, which was the highest since late February.
The gains came despite Washington’s order to Beijing to close its consulate in Houston, Texas, amid accusations against China of espionage. This had previously affected risk sentiment in Asia, initially lowering stocks before Asian stocks recovered.
China said the order was an “unprecedented escalation” by Washington, and a source said Beijing was considering closing the US consulate in Wuhan in retaliation.
United States President Donald Trump said other consulate closings were “always possible.”
“You almost have a tug of war in the markets between positive and negative and it is finally balanced. It appears that the markets are pricing in a V-shaped recovery, so you can expect the small negatives to have a massive impact on the markets, “said Justin Onuekwusi, portfolio manager at Legal & General Investment Management.
“But the pullback is likely to be brief as there are people waiting for a dip.”
Positive surprises in corporate earnings in Europe helped the mood, including from Unilever, French-Italian chipmaker STMicroelectronics, and automaker Daimler.
Investors will be keeping a close eye on the weekly US jobless claims figures due at 1230 GMT for the latest indications of how the new coronavirus pandemic has affected the US economy. The United States recorded more than 1,100 new coronavirus deaths for the second consecutive day on Wednesday.
Even though the virus is far from under control, analysts say unprecedented stimulus measures to boost battered economies continue to provide structural support for higher-risk assets.
“The liquidity forces are unmatched … we are seeing what happened after the global financial crisis (GFC), but we are seeing it on steroids,” said Kay Van-Petersen, global macro strategist at Saxo Capital Markets in Singapore.
“It is rare that you see monetary and fiscal policy activated, and when they are activated they only activate a little bit.”
GOLD GLITTERS
In the currency markets, the euro was up 0.1%, close to the 21-month high of $ 1.1601 that it touched on Wednesday, as the agreement among members of the European Union on a large economic recovery fund continued to give momentum .
The dollar fell marginally against a basket of currencies and was unchanged against the Japanese yen.
Gold prices rose 0.3% to $ 1,876.60 per ounce, a new nine-year peak, with prices rising more than 23% for the year.
Investors have flocked to safe haven as they seek refuge from a possible reversal in rising stock prices and a possible rise in inflation after so much monetary and fiscal stimulus.
Oil prices rose, with US crude adding 14 cents to $ 42.04 a barrel and world benchmark crude Brent up 12 cents to $ 44.41 a barrel.
Additional reports by Sujata Rao in London and Andrew Galbraith in Shanghai; Editing by Raissa Kasolowsky
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