European Stocks Extend Last Week’s Rally Led By Pharma Shares
European Stocks Extend Last Week’s Rally Led By Pharma Shares
(Bloomberg) -- European equities surged on Monday as investors digested the latest news on the coronavirus and measures to fight it.
The Stoxx Europe 600 was up 1.3% by the close in London, led by gains in the pharma, oil, technology and chemical sectors. The benchmark index posted its best week since 2011 last week. This is also the first Monday since early March that the Stoxx 600 has advanced.
After five weeks of declines, European stocks rallied last week as countries around the world unveiled a raft of support measures to limit the fallout from the pandemic and help economic growth. Sentiment was also helped today by gains in U.S. equities on the optimism that major health-care companies are making progress in delivering faster virus testing and pushing ahead with developing a vaccine.
“Governments and central banks are going all-in and there should be no doubt about their ability and willingness to ensure that this recession will be as short as possible,” said Stephen Jen, chief executive officer of Eurizon Slj Capital. “I think equities and risk assets may have already bottomed, and risks are biased to the upside from here. Investors should not bet against the central banks and the fiscal authorities.”
Roche Holding AG and Novartis AG were among the biggest advancers in Europe today. Roche Chief Executive Officer Severin Schwan hopes to have secured data in a month on whether its drug Actemra helps fight coronavirus or not, Aargauer Zeitung reported. The U.S. Health and Human Services Department accepted 30 million doses of hydroxychloroquine, which has yielded promising yet inconclusive results in a small coronavirus trial, from Novartis AG’s Sandoz unit.
ASML Holding NV gained 6.6% today even as it cut its revenue outlook for the first quarter and halted share buyback plans after complications from the novel coronavirus caused supply-chain problems and shipment delays. A Bloomberg Intelligence analyst Masahiro Wakasugi said the company can maintain a high gross margin even as the Covid-19 outbreak impacts sales, due to its low fixed costs.
A gauge for the banking sector was down 3.1%, by far the worst performing subgroup today. European lenders including UniCredit SpA, ABN Amro Bank NV and ING Groep NV suspended dividend payments on 2019 earnings after the European Central Bank pushed banks to hold off on distributions until at least October to improve their financial strength amid the coronavirus turmoil.
Shares in travel & leisure companies dropped again on Monday, with EasyJet falling 7.2% after it grounded its entire fleet having completed customer-repatriation flights, and said it’s in talks to build a cash cushion to see it through the gap in business caused by the coronavirus.
READ: How Covid-19 Could Devastate European Aviation in Four Charts
The U.K.’s FTSE 250 Index underperformed, down 1% amid fresh worries over the domestic economy after Deputy Chief Medical Officer for England Jenny Harries warned that lockdown measures may need to be in place for months.
“We remain cautious despite large stimulus announcements and maintain a slight underweight allocation,” said Esty Dwek, head of global market strategy at Natixis Investment Managers. “Valuations have come down sharply since the outbreak, suggesting much more attractive entry points for the longer term, but it may still be too early to add a lot of risk to portfolios.”
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