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European stocks surge on hopes of quicker economic recovery

·4-min read
London’s benchmark index climbed 0.91% after the opening bell, rising to its highest level in two and a half-weeks. Photo: Daniel Sorabji/AFP via Getty Images
London’s benchmark index climbed 0.91% after the opening bell, rising to its highest level in two and a half-weeks. Photo: Daniel Sorabji/AFP via Getty Images

European markets closed solidly higher on Monday, with the FTSE 100 (^FTSE) shrugging off pressure from a stronger pound, rising to its highest level in a month.

London’s benchmark index climbed 2.52% to 6,756.11 points, while the DAX (^GDAXI) climbed 0.54% and the CAC (^FCHI) rose 1.6% amid hopes of rapid economic recovery.

Mining companies and energy producers led the rally in London, with companies such as BP (BP.L) and Royal Dutch Shell (RDSA.L) higher, although banking, travel and hospitality stocks also gained amid hopes of restrictions lifting soon.

On the FTSE All Share Index, National Express (NEX.L) and Stagecoach (SGC.L) were some of the biggest gainers, up more than 10%, while EasyJet (EZJ.L) and TUI (TUI.L) also showed respectable gains too.

UK prime minister Boris Johnson speaking during a visit to a vaccine centre in London, said the need for "progress that is cautious but irreversible" ahead of his decision about when to lift lockdown.

"The question is a judgement of how quickly we can do that safely," he told Sky News. "These are the judgments that will be made this week and we will talk to everybody who has an input into that debate because it is a very important and fine judgment."

He added: "Clearly schools [reopening] on 8 March has for along time been priority of this government and families up and down country. We will do everything we can to make that happen but we have got to keep looking at the data."

"Rates still very high, more than at the April peak last year, so we have got to be very prudent."

WATCH: PM wants to see 'cautious and irreversible' progress

The UK has been among the leaders in getting people inoculated relatively swiftly against coronavirus, ramping up its vaccination programme in the country.

Over the weekend the UK government announced that its vaccine rollout met its target of 15 million people, in the top four priority groups, receiving their first jab by 15 February.

"We have already seen the so-called 'COVID recovery group' push Johnson to commit on an April removal of all restrictions, and while that may somewhat optimistic, it is no doubt a reminder of the possible economic surge that could be around the corner," Joshua Mahony, senior market analyst at IG, said.

"Both scientists and politicians alike have expressed optimism that this could be the final lockdown, with value stocks understandably gaining traction at the prospect of an economic reopening in the coming months.

"Thus it comes as no surprise to see the FTSE gains headed up by stocks in heavily-hit sectors such as travel, pubs, banks, restaurants groups, and hotels."

He adds: "There is certainly a risk over exactly how the more contagious and elusive strains in Bristol and South Africa could dent hopes of a reopening. However, there is a feeling that the vaccination efforts will at least lessen the impact of those strains even if it does not entirely protect against transmission."

READ MORE: Pressure on UK government to map 'clear route out of the crisis'

US markets were closed on Monday for Presidents' Day, leaving other geographies and asset classes to take up the reins. Last week the S&P500 (^GSPC) and tech-heavy Nasdaq (^IXIC) again reached record highs.

At the European close, S&P 500 futures (ES=F) were up 0.52%, Dow futures (YM=F) gained 0.67%, and Nasdaq futures (NQ=F) were 0.41% up.

Asian shares hit record highs overnight as the coronavirus vaccine rollout continues to raise hopes of a rapid economic recovery. It was also fuelled by new fiscal aid from Washington, while oil prices rose on heightened tensions in the Middle East.

MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 0.57%.

Japan’s Nikkei 225 index (^N225) closed above 30,000 points for the first time since 1990, after the country’s economy recorded another quarter of double-digit annualised growth to beat expectations.

Japan’s economy expanded more than expected in the fourth quarter, extending its recovery from its worst post war recession. It came as overseas demand boosted exports and capital expenditure.

The world’s third-largest economy grew an annualised 12.7% in October-December, government data showed, marking the second consecutive quarter of increase and exceeding a median market forecast for a 9.5% gain.

READ MORE: Japanese economy sees recovery from pandemic slump

"Japan is expected to start coronavirus vaccinations this week, which is also supporting stock prices. However, Japanese stocks have rallied 8% so far this month, and some analysts warn that the market may be overheating," Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank, told Reuters.

“Earnings growth has already been priced in for at least a year from now. There is reluctance to chase the upside from here, but stocks won’t fall too much."

China and Hong Kong markets are shut for the Lunar New Year holiday.

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