European Stocks Extends Gains on Tech and Energy Sector Performance
European stocks rebounded slightly on Tuesday and extended the upside momentum into Wednesday trading as technology companies continue enhancing investor’s sentiments. Strong gains from the energy and healthcare sectors added to the upside momentum despite sluggish sentiments about travel and leisure companies.
The threat of the second coronavirus wave has forced several European countries to rethink social distancing measures.
The UK prime minister is planning to impose a restriction on bars, hotels, and a few other sectors to avoid the virus spread. European stocks fell more than 3% on Monday, marking the biggest single-day drop in the last three months.
“We project a modest temporary setback in response to more modest, better targeted and often regional restrictions,” said Holger Schmieding, chief economist at Berenberg Bank, of Europe generally.
“Many such measures will hit parts of consumer spending (mostly services such as leisure, entertainment, tourism) disproportionally. We expect these measures to temporarily dampen but not derail the overall economic rebound,” Holger Schmieding added.
Oil prices soared sharply on Tuesday and extended gains in Wednesday session amid prospects that fresh restrictions would have a very limited impact on economic activities. Shares of London-based oil majors Royal Dutch Shell grew nearly 3% on Tuesday.
Economic data news continues to enhance the investor’s sentiments. Data from the European Commission indicated that eurozone consumer confidence jumped almost to -13.9 in this month, up from -14.7 in August.
Ifo Institute, on the other hand, expects German GDP to shrink only by 5.2% this year compared to the earlier forecast for a 6.7% drop.
Asian stock markets are still struggling to regain momentum due to rising concerns over economic restrictions. The US dollar surged to more than two months high against the six major currencies. The euro and Australian dollar underperformed against the US dollar in the past couple of sessions. Gold price also fell back below $1900 an ounce.