Europe: Shares inch up, all eyes on euro zone fiscal package

[BENGALURU] European stock markets inched higher to post a third straight day of gains on Wednesday, tracking a rally on Wall Street, but sentiment remained fragile with all eyes on whether euro zone finance ministers will agree an economic rescue package.

The pan-European Stoxx 600 index ended up 0.02 per cent, reversing earlier losses of as much as 1.5 per cent. Equities posted a strong start to the week on hopes that the rate of coronavirus infections was plateauing in western Europe and the United States.

While the daily death toll rose again in Spain, and France became the fourth country to register more than 10,000 deaths from the virus, Wall Street rallied on hopes that the outbreak was close to its peak in the United States.

London shares closed down 0.5 per cent, paring earlier losses of up to 2 per cent, while the main index in Paris finished 0.1 per cent higher.

Euro zone finance ministers have struggled to agree a coordinated economic support package despite several calls for common debt issuance to back businesses impacted by the outbreak.

"The impression it gives the world is that Europe is disjointed, and that will reinforce the view that the overall response will be slower and less impressive than elsewhere," said Kit Juckes, a macro strategist at Societe Generale in London.

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Energy, mining, insurers and bank stocks were among the biggest decliners. Defensive real estate stocks gained 1.4 per cent, while travel and leisure led with a 3.3 per cent rise.

UK insurers, including Direct Line and Aviva PLC , were among the biggest decliners on the Stoxx 600 after they cancelled more than 1 billion pounds (S$1.71 billion) of dividends on Wednesday to conserve funds to tackle the fallout from the pandemic.

Sources said carmaker Renault's board might also consider suspending its dividend while miner Rio Tinto said it would press ahead with its own payout.

The pan-region benchmark index has gained about 20 per cent since hitting an eight-year low on March 16, boosted by aggressive global stimulus measures, but remains 25 per cent below its all-time high.

The chairman of the euro zone finance ministers, Mario Centeno, suspended talks on a half a trillion euro package until Thursday, sending the 10-year Italian bond yield to its highest since March 19.

"If we did get confirmation that Europe was moving towards joint liability, debt issuance etc, even if it's relatively small, setting the precedent would be a powerful signal," said Graham Secker, chief European equity strategist at Morgan Stanley.

With countries doubling down on lockdowns to curb the spread of the virus, analysts have further cut profit estimates for Stoxx 600 firms, with first-quarter earnings now expected to slide 15.7 per cent compared with the Jan 1 forecast of a 10.5 per cent rise.

REUTERS