European Equities Post a Second Week of Gains Amid Vaccine Hopes

(Bloomberg) -- European equities ended the day little changed, closing a strong week as optimism about vaccine prospects outweighed concerns over surging new coronavirus cases and hospitalizations across the globe.

The Stoxx Europe 600 Index was flat at the close, with cyclicals including banks, insurance and autos leading, while personal goods and consumer stocks lagged. Spanish utility Naturgy Energy Group SA surged after the divestment of its Chilean unit, while German food delivery company Delivery Hero SE slumped after its South Korean deal faced antitrust issues.

The rally in European stocks paused on Thursday after a three-day euphoric advance into value areas of the market, driven by a potential breakthrough in the development of a coronavirus vaccine. Rising infections and warnings about the pandemic’s continued economic damage from top central bankers tempered the optimism.

Still, the benchmark has surged almost 13% in the past two weeks, its best such gain since May 2001.

Strategists at Bank of America Corp. cut European equities to neutral, arguing that most of the macro recovery expected over the coming months is already priced in. The strategists remain overweight in cyclical laggards like value versus growth, banks, insurance, energy and airlines.

“With the benefit of hindsight, what we have seen this week is the first leg of the end-of-year rally across risk assets,” said Stephane Barbier De La Serre, a strategist at Makor Capital SA. “In first analysis, that was a brutal one, which, by definition, now requires some consolidation so that the second leg can concretely materialize, some kind of a launching pad.”

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