European equities rose on Tuesday as investors hunted for bargains following a global stock downturn in the previous session driven by the threat of the Delta variant of coronavirus.
The Stoxx 600 index rose 0.9 per cent, following its biggest drop of the year. Energy companies listed on the regional benchmark gained 1.3 per cent, financial services businesses advanced 1.1 per cent and European industrials rose 1 per cent.
Brent crude, the international oil marker, added 1.1 per cent to $69.41 a barrel after shedding almost 7 per cent on Monday as jitters about global economic growth were compounded by producer group Opec + agreeing to raise output by 400,000 barrels a day.
The rapid spread of the Delta strain of coronavirus has hit the developing world hard, led to renewed social restrictions in Asian countries that had previously appeared to have the virus under control and caused British businesses to struggle with worker shortages.
However, despite some angst over the spread of virus variants, many investors have remained largely optimistic as they look at fundamentals that remain strong for many major countries.
Analysts expect companies listed on the MSCI Europe share index to report 109 per cent year-on-year earnings growth for the second quarter, while a recent Bank of America survey found that fund managers mostly expect the Stoxx to rise this year.
“The underlying factors that were driving markets in the first half of the year are still there,” said Marija Veitmane, senior multi-asset strategist at State Street Global Markets. “Economic recovery, better earnings, super-accommodative monetary policy and a lot of money on the sidelines from savings and cheap borrowing. It is all still there.”
The benchmark 10-year Treasury note yield, which moves inversely to its price, added 0.03 percentage points to 1.21 per cent. Traders herded into the haven asset on Monday, sending the yield to its lowest since February.
Asian markets, however, fell on Tuesday as concerns lingered about the effect of the Delta variant on economic growth.
“Investors are worried that a fresh outbreak could potentially hinder the pace of economic reopening,” said Tai Hui, chief Asia market strategist at JPMorgan Asset Management. “The next one to two months will be an important litmus test of governments’ strategy in normalising lives and economic activities amid the threat of the pandemic.”
Japan’s benchmark Topix dropped 1 per cent while Hong Kong’s Hang Seng index reversed early gains to lose 0.8 per cent. China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks traded flat.
In currency markets, sterling dropped a further 0.2 per cent against the dollar to $1.3649 after losing 0.7 per cent on Monday, marking its lowest level since early February.
The UK currency has been hit by a sudden resurgence of Covid-19 outbreaks just as the government removed the last of its restrictions to contain the virus. On Monday, the US Centers for Disease Control and Prevention placed the UK on its highest tier of Covid travel warnings, urging Americans not to visit as England celebrated “freedom day”.
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2021-07-20 08:16:14Z
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