Europe: Stoxx 600 closes at record high on global recovery optimism

[BENGALURU] Europe's benchmark equity index closed at a record high on Tuesday, recovering all of its pandemic-driven losses as investors bet on a speedy global economic recovery, spurred by bumper stimulus spending and Covid-19 vaccination programmes.

European traders returned from a long weekend to push the Stoxx 600 up 0.7 per cent to 435.36 points. It has climbed more than 60 per cent from last year's lows and surpassed its previous all-time high of 433.90 points in February 2020.

The German DAX rose 0.7 per cent to add to its recent record-setting rally, France's CAC 40 was up 0.5 per cent, also fully recovering from last year's crash and Britain's FTSE 100 jumped 1.3 per cent.

"European equity markets have a higher percentage tilt to the more distressed cyclical and value parts of the market that performed poorly not only in 2020, but for several years before as well," Niall Gallagher, investment director for European equities at GAM wrote in a note.

"Any change in the economic environment that sees a pick-up in growth and a pick-up in inflation is likely to positively impact these sectors and as they are a higher weighting in the market, this explains the recent expectations that European equities may do better in the next few months."

Economically sensitive sectors such as banking, commodity and automakers rebounded strongly this year, boosting European stocks.

However, it took the benchmark seven months more than the US S&P 500 to reclaim its pre-pandemic high, slowed down by a sluggish vaccination roll-out and a new wave of infections.

Miners were the top gainers on Tuesday, up 1.8 per cent, while travel & leisure stocks, automakers and food & beverage shares rose 1.0 per cent.

Data showed, euro zone unemployment was unchanged in February compared with an upwardly revised reading for January, as European furlough schemes limited the impact of the second wave of the pandemic in the fourth quarter on jobs.

"The euro-zone's unemployment rate was unchanged at 8.3 per cent in February despite virus measures being tightened, highlighting the extent to which government policies have protected jobs during the pandemic," said Jessica Hinds, Europe economist at Capital Economics.

Swiss bank Credit Suisse slipped 0.4 per centafter sharp losses last week, as it announced an estimated loss of 4.4 billion Swiss francs (S$6.3 billion) from its relationship with Archegos Capital Management.

London stocks took cheer as British Prime Minister Boris Johnson said the next phase of a planned reopening of the economy could take place next week.

BP gained 3.2 per cent after the oil major said it expected to reach its US$35 billion net debt target in the first quarter of 2021.

REUTERS