European Stocks Climb Led by Cyclicals on New ECB Facility
European Stocks Decline for Second Day With Virus Cases Rising
(Bloomberg) --
European stocks climbed, with cyclicals in the lead after the European Central Bank said it’s setting up a new liquidity facility for central banks outside the euro area.
The Stoxx Europe 600 Index rose 0.7% at the close of trading. Carmakers, financial services and banks led gains, while travel shares were the worst performers. The benchmark was down 1.3% earlier on worries about rising coronavirus cases in countries including the U.S. and Australia.
Deutsche Lufthansa AG jumped 7.1% after the airline’s biggest stockholder said he’d vote in favor of a 9 billion-euro ($10 billion) government bailout. Wirecard AG slumped 71% after filing for insolvency following an accounting scandal. The stock hasn’t gone to zero due to technical reasons, but the equity is “worthless,” Mirabaud Securities analyst Neil Campling said.
Stocks are on a bumpy path after surging to a three-month high in early June, as optimism about stimulus measures and economic recovery war with concern about rising coronavirus cases. The International Monetary Fund has projected a deeper recession and slower recovery for the global economy than it anticipated two months ago.
“If market flicks a switch from risk-off to risk-on on an ECB headline then what does that tell one? The bears have a very weak hand and staying power and the fear of missing out is ever present, real and growing as economies open,” said Manish Singh, chief investment officer at Crossbridge Capital. “Europe is in much better state on dealing with Covid, and summer spending by consumers is about to start.”
The ECB said its new facility will “provide precautionary euro repo lines to central banks outside the euro area” in response to the fallout from the coronavirus pandemic. In addition, Germany’s constitutional court rejected a separate challenge against the ECB’s 2015 Expanded Asset Purchase Program as inadmissible.
READ: German Top Court Rejects Separate Case Over ECB’s 2015 QE
Among other notable movers, German chemicals giant Bayer AG dropped 2.9% after initially gaining upon reaching a long-awaited settlement for multiple lawsuits. The deal still leaves open the potential for more litigation.
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