Europe Shares Rise for Second Day With All Eyes on Stimulus

(Bloomberg) -- European stocks advanced on Wednesday as the region’s virus statistics remained manageable despite a gradual return to normal economic life, and as leaders prepare to discuss a recovery fund worth 750 billion euros ($843 billion).

The Stoxx Europe 600 Index rose 0.7%. Health-care shares climbed the most, while construction shares extended Tuesday’s gains on hopes for a U.S. infrastructure stimulus windfall.

Such a stimulus package is unlikely to arrive before spring 2021, Cowen analyst Chris Krueger wrote in a note on Wednesday, highlighting a legislative pipeline busy with other virus relief measures and police reform.

Equities in the region had slumped late last week after surging in early June, but recouped lost ground after Bloomberg reported on U.S. considerations for additional stimulus spending worth $1 trillion. Cyclical industries have led the latest rebound, with construction and mining stocks rising the most this week.

“Greater market breadth is possible and necessary for equities to grind higher,” Barclays strategists including Emmanuel Cau wrote in a note, cautioning that further returns will require diversification away from highly-valued “safe stocks.” Reopening economies and improving PMI economic data are likely to lead to a rebound in cyclical stocks’ relative earnings momentum vis-a-vis defensive sectors, Cau said.

The region’s main gauge only has about 1% in upside from Tuesday’s close until the end of 2020, according to strategists surveyed by Bloomberg.

British utility SSE Plc was the region’s top performer, rising 9.1% after announcing a decarbonization-focused investment plan and committing to sustain its dividend. Belgian retailer Colruyt SA fell 5.2% after reporting full-year sales and Ebit slightly below estimates.

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