Europe: Stocks gain as concerns about Omicron's severity ease

[DUBAI] European equities climbed for a third day as the latest coronavirus studies fuelled optimism that economic growth can withstand Omicron risks.

The Stoxx Europe 600 rose 0.3 per cent at 8.02 am in London, to a 2-week high. Travel and leisure, and carmakers were among the biggest gainers.

The Omicron coronavirus variant appears less likely to lead to hospitalisations than the Delta strain, according to preliminary data from studies. Pfizer's Covid-19 pill gained clearance for emergency use in the US on Wednesday (Dec 22), delivering a more convenient treatment option for at-risk patients at a critical point in the pandemic. On Thursday, AstraZeneca said its booster shot significantly increased levels of antibodies against Omicron.

Incremental news on Omicron is not getting worse, the approval of the Pfizer pill is helpful, and the European Central Bank is prepared to remain dovish, "supporting growth prospects and sentiment for European stocks", Esty Dwek, chief investment officer at Flowbank, said. "The Santa rally might have been delayed, but it should still happen."

European stocks have been rising in recent days after being under pressure over the Omicron variant leading to new restrictions and the hawkish shift in central bank policies. However, many major asset managers continue to favour stocks and see them as the best vehicle for returns as bond yields remain low.

While stocks have been eking out gains in recent days, volumes are getting thinner ahead of the holidays. "I would classify this bounce as a relief rally, but it's not sustainable yet," said Alberto Tocchio, a portfolio manager at Kairos Partners. "I would not buy here and wait for some further news and studies on Omicron, Biden's fiscal plan."

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