European stocks rebound after sharp sell-off

by Jonathan Adams

The pan-European STOXX 600 index closed 1.8% higher, wiping out almost all of its 1.4% loss on Tuesday

European stocks marked their best day in nearly two months on Wednesday, recovering from a sharp sell-off in the previous session as resource stocks hit a 10-year high, while data showed euro zone business activity picked up in April.

The pan-European STOXX 600 index closed 1.8% higher, wiping out almost all of its 1.4% loss on Tuesday, when concerns over policy tightening in the US had rattled high-value technology stocks.

European tech stocks added 2.7% after tumbling 3.7% in the previous session.

Europe’s basic resources index climbed 4.7% to a 10-year peak, with big London-listed miners leading gains as copper prices hit decade highs on optimism about a speedy recovery in the global economy. The index also marked its best day in nearly a year.

Oil and gas stocks soared 3.2% in their best day since mid-February, as expectations of recovering demand benefited oil prices, while the construction and materials index climbed 2.9% to a record high.

Data shows the vaccine run-rate in Europe is now picking up rapidly, European macro data is improving and the Q1 earnings season suggests corporates are able to deal with higher input costs, UBS analysts wrote in a note.

Euro zone business activity accelerated in April as the bloc’s dominant services industry shrugged off renewed lockdowns and returned to growth, a survey showed.

Growth-sensitive stocks have benefited from expectations of an economic recovery, with banks, travel and leisure and basic resources leading gains this year. A strong first-quarter earnings season has also helped sentiment.

European earnings are now expected to surge 83.1% in the first quarter, according to Refinitiv IBES data, up from last week’s forecast of 71.3% growth.

German cooking appliances maker Rational climbed 12.7% to the top of the STOXX 600, following better-than-expected Q1 results.

Danish shipping company Maersk rose 6.9% after it said it was expecting an “exceptionally strong” performance in Q1 to continue for the rest of the year.

Stellantis rallied 7.0% after the carmaker reported better-than-expected quarterly revenue but warned that a global shortage of semiconductors would affect production this quarter more heavily.

German fashion house Hugo Boss rose 5.2% as it saw first-quarter sales almost double in mainland China, and its casual business returned to growth.

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