European Shares Rise for a Second Day, Fueled by Deal Activity

(Bloomberg) -- European equities rose for a second day as deal activity boosted some shares and investors prepared for the earnings season.

The Stoxx Europe 600 Index added 0.1% at the close. Spain’s Telefonica SA jumped after it sold its towers division, boosting telecoms, while French grocer Carrefour SA soared 13% following an approach from Alimentation Couche-Tard Inc. Banks and travel shares underperformed.

In Europe, as investors await a vaccine-led recovery, more restrictions could be imposed, with German Chancellor Angela Merkel warning that the country may need to extend its lockdown until Easter because of the risks posed by the fast-spreading U.K. strain. However, The European Central Bank will maintain favorable monetary conditions for as long as needed, governing council member Francois Villeroy de Galhau said today.

“Following the highs we saw late last year, it’s normal that the market remains flat, macro data keeps very weak and even if vaccine news is positive, more lockdowns in Europe are on the table,” said Ignacio Cantos, investment director at ATL Capital in Madrid. The “next catalyst will be the upcoming earnings season.”

The ECB’s latest projections for economic growth in the euro area are still “very clearly plausible” despite the resurgent coronavirus and latest lockdowns, President Christine Lagarde said on Wednesday.

While some investors are concerned about the impact of prolonged measures to curb the spread of the coronavirus, Kempen Capital Management is optimistic that vaccines will help fuel a strong economic recovery. The asset manager prefers European equities to the U.S., citing cheaper valuations and exposure to value stocks.

“The greatest opportunities for investors in 2021 lie in being able to profit from a robust recovery in the global economy,” said Joost van Leenders, senior strategist at Kempen. “The lockdowns will have the desired effect.”

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