After reporting the worst weekly performance since June, European stocks rebounded sharply on Monday and extended the uptrend into Tuesday trading. The upside momentum is supported by a sharp rebound in banking stocks that had hit a record low last week. Investor’s strategy of buying on the dip is also supporting European stocks.
The European blue-chip index plunged almost 3.7% last week due to concerns over increasing virus infections and banking stocks selloff.
Baking stocks reported big gains on Monday. Shares of HSBC grew almost 9% after reports suggested that Chinese Ping An Insurance Company raised its stake in the bank. HSBC stock has suffered big losses last week due to the money laundering scandal.
Shares of several other banks nudged big gains, resulting in a 3.6% increase in the banking sector index.
Commerzbank stock price jumped 4.3% as it appointed Manfred Knof to lead the bank. Deutsche Bank, Barclays, Standard Chartered, and Credit Agricole all added above 5% gains.
Economic data also added to investor’s sentiments. Chinese industrial profit rose 19% year over year in August.
Silvana Tenreyro, Bank of England policymaker, said in an interview that the investigation from Central Bank over the negative interest rate has yielded encouraging results. The bank has been actively discussing the impact of negative interest on the economy over the past couple of weeks.
US stock markets have started the week on a positive note, with all three major stock market indices jumped more than 1.5%.
US market futures are in green on Tuesday, indicating the extension of the upside trend. The upside momentum is backed by hopes that lawmakers will make a consensus on a second stimulus package.
“There’s been concern that the momentum of the economic recovery was slipping with Congress delaying fresh stimulus,” Bruce Bittles, chief investment strategist at Baird, told MarketWatch. “Now it looks like we’re closer to getting a package sooner or later.”