EU’s STOXX 600 Record High on Global Recovery Optimism

Europe’s benchmark equity index reached a record high on Tuesday, recouping all of its losses from the pandemic. Investors were looking to an accelerated global economic recovery, prompted by bumper stimulus spending and coronavirus vaccination programmes.

From a long weekend, EU traders have returned to push the STOXX 600 up 0.8% to 435.7 points. It has edged up more than 60% from 2020’s lows and surpassed its previous all-time high of 433.90 points in February last year.

The German DAX gained 1.1%, adding to its recent record-setting rally.  France’s CAC 40 has also fully recovered from last year’s crash and added 0.6%, while the UK’s FTSE 100 advanced 1.2%.

Niall Gallagher, investment director for European equities at GAM wrote in a note that European equity markets have a higher percentage tilt. That is to the more distressed cyclical and value parts of the market. Those that performed poorly not only in 2020, but for several years before as well, it said in the note.

Furthermore, Gallagher said any change in the economic environment that sees a pick-up in growth and a pick-up in inflation is likely to positively impact these sectors. As they are a higher weighting in the market, this explains the recent expectations that European equities may do better in the next few months, he added.

Banking, commodity and automakers were economically sensitive sectors that rebounded strongly this year, boosting European stocks.

Sharp losses hit Swiss bank Credit Suisse last week slipping 0.6%. It announced an estimated loss of 4.4 billion Swiss francs ($4.7 billion) from its relationship with Archegos Capital Management.

UK stocks benefitted as British Prime Minister Boris Johnson said a planned reopening of the economy could take place next week.

Wall Street’s Indexes

On Monday, Wall Street’s main indexes notched all-time highs. Data pointing to a strong U.S. labour market and business activity recovery helped lift the global mood. 

It took up to seven months, however, more than the S&P 500 for the benchmark to reclaim its pre-pandemic status. A sluggish vaccination roll-out and a new wave of infections slowed it down.

On Tuesday, miners were the top gainers, up 2.4%, while banks, automakers and insurers inched up more than 1.0%.

Meanwhile, British Airways-owner IAG, easyJet and Ryanair lagged wider markets. Johnson added it was too soon to say whether international summer holidays can go ahead this year.

BP rose 2.8% after the oil major said it expects to reach its $35 billion net debt target in Q1 of 2021.