European equities gained the most in nearly two weeks on optimism that coronavirus death tolls are falling in several hotspots of the health crisis.
The Stoxx Europe 600 Index was up 3% at 10:02 a.m. CET, led by automakers, travel and leisure and insurance sectors, while shares in defensive industries such as health care, utilities and telecoms underperformed. The benchmark index is still down 27% since February 19.
Fatalities in the state of New York fell for the first time, while Italy had the fewest deaths in more than two weeks, France reported the lowest number in five days and Spain’s tally fell for a third straight day. However, U.S. President Donald Trump warned that a “very horrendous” phase in the pandemic is approaching and companies are reducing their guidance and suspending dividends because of the economic damage from the virus.
“Investors are focusing on the optimism that there’s a stabilisation in the rate of deaths from the virus and on the first-quarter reporting season where they hope to get more visibility,” said Ulrich Urbahn, head of multi-asset strategy and research at Joh Berenberg Gossler & Co. “In the long term, there are many reasons not to be too pessimistic: in addition to the massive stimulus measures and the enormous relative attractiveness of equities, the dry powder of many investors — the holdings in money-market funds — have reached a record level.”
Despite the market’s rebound since a low hit in mid-March, Citigroup Inc. strategists remain cautious on the outlook for stocks, keeping a defensive sector allocation. “We expect global EPS (earnings-per-share) to fall by around 50% in 2020, which is probably not yet reflected in equity markets,” strategists led by Robert Buckland wrote in a note.
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