European Shares Track Asia for Gaining on Rebound Optimism

On Monday, European shares climbed higher, keeping track of Asian markets that were mostly fueled by optimism over a rebound in the Chinese economy. As far as trade-sensitive stocks are concerned, they experienced an increase over a report that the trade chief of the European Union had called on Washington for dropping some of the trade tariffs. There was a 0.3% gain in the pan-European STOXX 600, with auto and insurance stocks some of the biggest gainers. As far as the telecoms index is concerned, it reached a three-week high because it was powered by a 7.3% gain for KPN, a Dutch telecommunications company.

This was primarily because of a report that a takeover was being mulled over by private equity firm KQT, based in Sweden. On Friday, banking stocks had led the benchmark index to its weekly gain for the second week straight and they continued to be in great demand. The increase in demand is mostly because of expectations of additional U.S. stimulus and increasing chances of a Democratic victory in the November 3rd, U.S. presidential elections. Market analysts said that investors hadn’t lost faith in a further stimulus package to be introduced and that an effective vaccine for COVID-19 will soon hit the market.

However, the specter of fresh lockdowns has once again raised its head because of a surge in cases of the coronavirus infections across the entire continent. This has cast a shadow over a nascent economic recovery. Italy is once again readying up for nationwide curbs and Philip Lane, the chief economist at the European Central Bank said that the eurozone economy was going to face a tougher challenge. Boris Johnson, the UK Prime Minister, is also expected to introduce some new measures. The Italian bourse rose by 0.1% whereas London’s FTSE 100 index remained flat.

Market analysts said that this was a precarious time for investors because further lockdowns would undoubtedly jeopardize the already slow and fragile economic rebound and would have a huge impact on consumer confidence. Later this week, data on business conditions, industrial production, and inflation is due, which will further reveal how the economy is doing. Apart from that, all eyes are currently locked on the European Union summit, which is scheduled to take place on October 15th and 16th, especially because of a deadline imposed by the UK for a trade deal post-Brexit.

Strategists stated that there had been some progress made in talks and if this continues, these negotiations could continue beyond the deadline self-imposed by the United Kingdom. The third-quarter earnings season is also drawing closer and analysts are expecting a 38% year-on-year decline at STOXX 600 firms in the quarter after a slump of 50.8% in the previous quarter. However, shares of Airbus SE climbed higher, as a report revealed that the new trade chief at the EU had told the United States to withdraw some tariffs on EU products worth $7 billion. If the US doesn’t do so, the EU trade chief said that they would import additional duties on European exports.