Europe: Shares extend rally on vaccine cheer, ECB comments

[BENGALURU] European shares rose for a third straight day on Wednesday as optimism around a potential Covid-19 vaccine and encouraging comments from European Central Bank chief Christine Lagarde offset worries of economic damage from surging infections.

The pan-European Stoxx 600 jumped 1 per cent, building on a 6 per cent rally this week as investors bought into utilities as well as travel-related stocks, a sector that has widely underperformed this year.

Technology stocks, which have tracked a surge in their US counterparts since the coronavirus-driven crash in March, gained 2 per cent.

The benchmark Stoxx 600 has surged nearly 45 per cent since March, thanks partly to historic global stimulus, but it is still down 6.5 per cent on the year as the resurgence in Covid-19 cases threatens a nascent economic recovery.

By comparison, the US benchmark S&P 500 has risen nearly 10 per cent this year and was propelled to record highs this week after drugmaker Pfizer Inc said its Covid-19 vaccine was 90 per cent effective.

ECB President Christine Lagarde said the central bank will focus on more emergency bond purchases and cheap loans for banks when it puts together its new stimulus package next month.

Ms Lagarde "gave a clear message that encouraging news about a vaccine would not stop the bank from loosening policy in December," said Jack Allen-Reynolds, senior Europe economist at Capital Economics.

Spain, which has been among the countries hit hardest by the health crisis, will get its first vaccines in early 2021, while Italy expects to receive an initial 3.4 million shots in January.

Meanwhile, the European third-quarter earnings season has been largely better than expected, with about 68 per cent of the Stoxx 600 companies that have reported so far beating estimates, according to Refinitiv data.

E.ON, Germany's largest energy firm, gained 1 per cent after it said demand had recovered faster than expected from the coronavirus crisis, while maintaining its 2020 forecast.

German auto supplier Continental fell 0.8 per cent as it warned of further restructuring expenses in the fourth quarter.

Dutch bank ABN Amro slid 5.6 per cent as it remained cautious despite reporting a much better-than-expected quarterly profit. European banks rose 0.2 per cent.

Nordea Bank fell 5 per cent after Finnish insurer Sampo said it had sold 4 per cent of the share capital in the bank in an accelerated bookbuild offering to institutional investors.

Among country indexes, German stocks rose 0.4 per cent, while London's FTSE 100 and France's CAC 40 added 1.4 per cent and 0.5 per cent, respectively.

REUTERS