European stocks rebound from multi months low, upside is limited
European stocks bounced back as traders sentiments turned positive after reports of stronger manufacturing and export data from Europe and Asia.
European stocks have hit multi months low at the beginning of the week due to concerns over lockdowns and prospects of slower growth in the December quarter.
Economic data lifted European stocks
The survey has hinted that Germany experienced record growth in new orders in October, with a guidence for more growth in November. In addition, the robust manufacturing data from China and Japan has been adding to investor’s sentiments.
The Eurozone manufacturing PMI data for October jumped to 54.8, up compared to 53.7 in September, driven by factory activity in Germany.
China’s manufacturing activity soared for the sixth straight month in October. Chinese Purchasing Managers’ Index (PMI) stood around 53.6 in the last month, beating analysts’ consensus estimate for 53.0.
The upside is limited for European stocks
Although European stocks recovered from multi months low, the upside movement appears limited in the analyst’s view because of fresh lockdowns.
France, Germany, Italy, and several other major European countries have imposed full or partial lockdowns to stop the virus spread. The lockdowns would negatively impact the economic recovery that these countries have started experiencing over the past two months.
BlackRock, the world’s top asset manager, downgraded European stocks to neutral amid lockdowns and a surge in COVID cases.
The prospects for V-shaped recovery are dented by fresh lockdowns as big banks have slashed their economic outlook for Eurozone.
Goldman Sachs expects the eurozone real gross domestic product to shrink 2.3% in the December quarter compared to the previous forecast for a 2.2% growth. “Looking ahead, we assume that the new restrictions will last for three months before they are gradually rolled back starting in February,” the bank’s economists wrote in a note to clients.