European Stocks Jump to 10-Month High on Brexit, U.S. Stimulus

European equities extended an advance to a fourth day, on hopes for a stimulus deal in the U.S. and as Brexit trade talks approach the final stretch.

The Stoxx 600 Index closed up 0.3% in London, the highest level since Feb. 26. The retail, technology and media sectors led the gains.

All eyes are on the Brexit trade deal talks as the U.K. and European Union head for a final battle over fishing rights, with officials cautiously predicting an agreement within days. Investors also continue to monitor U.S. stimulus negotiations after months of deadlock amid signs that the economic recovery there is faltering.

Despite worries over further lockdowns and uncertainty over post-Brexit arrangements, European equities have continued to grind higher in December, led by basic resources, travel firms and autos. Some investors may, however, be hesitant to move toward more cyclical stocks, which should benefit from a return to normality, said Ian Williams, a strategist at Peel Hunt.

European Stocks Jump to 10-Month High on Brexit, U.S. Stimulus

“Deserting the stuff that’s performed well for you, even if it looks very expensive, is quite a difficult call to make, so I think there’s a kind of herding among investors, reluctant to be the one that breaks away from the pack too early,” Williams said by phone.

Equities also got a boost from the news that European authorities are pushing for a compressed approval timeline for the Covid-19 vaccine from Pfizer Inc. and BioNTech SE to start an immunization campaign across the continent just after Christmas.

Among individual stocks, Electricite de France SA climbed 2% after the utility increased its profit target for 2020. Watches of Switzerland Group Plc jumped 6.3% after raising its guidance for 2021.

Basic resources shares have been on fire in December thanks to the surge in the price of copper, with stocks rising more than 12% in the period. Investors are now “overweight” miners for the first time since April 2017, Bank of America Corp. strategists said, adding that this may not be the end of their outperformance. European fund managers are now 21% net overweight miners compared to an underweight of 3% in November, BofA said.

©2020 Bloomberg L.P.

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