European Stock Markets Under Pressure, But Morgan Stanley Expects 10% Rebound

European stock markets futures rebounded on Tuesday after ending lower on Monday. The investors have been reacting negatively to a surge in coronavirus cases and tensions between the two largest economies.

The UK has imposed a two-week quarantine on peoples who are coming back from Spain. The decision has strongly hit travel companies during the Monday trade. The pan-European Stoxx 600 declined 0.3% on Monday as travel and leisure stocks plunged sharply.

Shares of Europe’s largest holiday firm Tui slipped 11% after the company canceled all holidays from the U.K. to Spain until August 9. Airline companies have also been facing bumpy ride. Shares of airline companies tumbled following quarantine decisions.

On the positive side, German business sentiment recovered sharply this month. This is evident from the robust growth in the Ifo Institute’s business climate index, which surged to 90.5 from 86.3 in June.

Meanwhile, Morgan Stanley expects at least a 10% rebound for European stocks. The bank is showing confidence in the 750 billion euros stimulus package. The firm claims that the stimulus package is a game-changer.

“We see scope for a further 10% outperformance from EMU [European monetary union] equities versus global peers,” Morgan Stanley analysts said in a note.

“The European Union could be bureaucratic and that’s to be expected but I think the European recovery fund is a dramatic change, it is unprecedented in terms of its formation,” Chris Dyer, director of global equity at Eaton Vance, told CNBC’s Squawk Box Europe Monday.

On the other hand, Asian markets rallied amid prospects for sharp economic recovery. China’s industrial profit jumped in June.

What Does it Mean?

• Gold price surged to a new all-time high of $1967.
• Bitcoin topped $11K level.
• Euro jumped to 22 months high against the US Dollar.
• The US dollar is struggling against all major currencies.