European Stocks Rally With DAX Turning Positive for the Year

European stocks rose on Tuesday, on course for a record monthly gain, and Germany’s DAX Index erased losses for the year on investor optimism about the development of coronavirus vaccines and reduced political uncertainty in the U.S.

The Stoxx 600 Index closed up 0.9%, led by energy and banking shares. EasyJet Plc and International Consolidated Airlines Group SA rose upon plans for England to cut its quarantine period for arrivals from high-risk countries. Meanwhile, Germany’s DAX benchmark is set to get more constituents and tighter rules in an overhaul, and erased its losses for the year.

European equities were boosted by global risk-on sentiment as President-elect Joe Biden starts his formal transition process. The region’s stocks have jumped 15% in November following a string of positive study results from companies racing to develop a vaccine against the coronavirus.

Stocks in sectors like travel, which have been hit hard this year by restrictions on movement, and economically sensitive industries have made big gains this month, while more defensive sectors like health care have lagged.

European Stocks Rally With DAX Turning Positive for the Year

“There’s been a sensible re-appraisal of a lot of these businesses,” Phil Smeaton, chief investment officer at Sanlam Investments, said by phone. If social distancing moves toward an end “then there’s some more grounds for these companies to run, especially against the old darlings, the growth stocks where people have been hiding out in companies that were relatively immune to Covid,” Smeaton added.

Germany’s DAX Index plans its most sweeping overhaul since its inception, adding 10 new companies and new quality controls after the implosion of Wirecard AG rocked investor confidence in the gauge. Index operator Qontigo will boost the number of members to 40 from 30 in the third quarter of next year, while reducing MDAX membership to 50 from 60 companies, it said in a statement.

Qontigo, a unit of Deutsche Boerse AG, will also impose new criteria on both existing and prospective DAX members, including a requirement to publish quarterly statements and audited annual results, with a fast exit for those failing to release them on time.

The changes “are unlikely to change the German corporate sector’s pro-cyclical tilt (as a function of its large autos and chemicals industries) and its strong export focus,” Milla Savova, a European equity strategist at Bank of America Corp., said by email.

©2020 Bloomberg L.P.

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