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Europe close: Stocks rally but analysts divided on outlook

By Alexander Bueso

Date: Monday 06 Apr 2020

Europe close: Stocks rally but analysts divided on outlook

(Sharecast News) - Stock across Europe rallied at the start of the holiday-shortened week, boosted by news of falling death rates from the Covid-19 pandemic in France, Italy and Spain, together with a big drop in the rate of new infections in the latter, although analysts remained divided on the outlook for shares.
"While today's rebound is welcome it still seems a little early to be trumpeting a turning point in sentiment given that we are still below last week's highs," said Michael Hewson, chief market analyst at CMC Markets UK.

The rate of new infections in Spain fell to 4,273 on Monday to reach 135,032, down from 6,023 new infections during the previous day, while in Austria the Chancellor, Sebastien Kurz, laid out plans to start easing the country's lockdown measures from 14 April.

By the end of trading, the benchmark Stoxx 600 had added 3.73% to 320.58, alongside an advance of 5.77% to 10,075.17 for Germany's Dax and a rise of 4.0% to 17,039.31 for Italy's FTSE Mibtel, while Spain's Ibex 35 added 3.99% to 6844.3.

Autos&Parts issues fared best, with the Stoxx 600 sector gauge trading up 9.5% to 320.04, while that for Travel & Leisure climbed 8.18% to 147.83.

Almost all the top 10 gainers on the Stoxx 600 leaderboard were London-listed stocks, with Tullow Oil pacing gains throughout the session.

In parallel, front-dated Brent futures were off 3.89% to $32.83 a barrel on the ICE.

At the weekend, the decision was taken to postpone a teleconference of OPEC+ energy ministers scheduled for Monday to Thursday as policymakers from producer countries tried to broker a deal.

Reports at the weekend indicated that Norway, which does not belong to OPEC+, might participate in any cuts, and that officials from the Canadian province of Alberta would dial in to the call.

Strategists at the top investment banks were divided on the outlook for global stock markets, with Andrew Garthwaite at Credit Suisse telling clients that shares might fall back over the next month but that the previous lows should hold, while JP Morgan strategist Mislav Matejka's recommendation to clients was to 'fade' rallies.

For their part, strategists at Citi said: "We expect global EPS to fall by around 50% in 2020, which is probably not yet reflected in equity markets. On the positive side, aggressive central bank action may limit further downside. What Could Turn Things Round? - A peak in the infection data, especially in the US, is probably needed for markets to stabilise."

There was some positive news to be had on the macroeconomic front.

The Sentix Institute's investor confidence gauge for the Eurozone in April fell to -42.9 from the prior month reading of -17.1 (consensus: -37.5).

However, a sub-index tracking investor expectations picked up slightly, from -20.0 to -15.8, a development that Claus Vistesen at Pantheon Macroeconomics described as a "bullish" development.


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