European shares bounce on US Fed stimulus
European shares joined a global rally this morning with sentiment lifted by the launch of the US Federal Reserve's corporate bond buying plan and easing concerns of a second wave of global coronavirus infections.
The Fed is set to start purchasing corporate bonds on Tuesday through the secondary market corporate credit facility, one of several emergency facilities to shore up liquidity.
The pan-European STOXX 600 index rose 2.2%, recovering from a slump in the past few sessions that was fuelled by grim forecasts of an economic rebound from the COVID-19 pandemic and a resurgence in infections in the United States and Beijing.
Soothing fears on Tuesday, health officials said there were 27 new coronavirus cases in Beijing, down from 36 the previous day.
"With second wave fears diverted, investors are having visions of the economy returning to pre-pandemic (levels) and are revelling in the incomprehensibly large global stimulus that will eventually find its way into every liquid asset imaginable," said Stephen Innes, markets strategist at AxiCorp.
Historic monetary and fiscal stimulus has partly powered a rebound in European equity markets since a coronavirus-fuelled crash in March, with the pan-European STOXX 600 index now only about 17% below its February record high.
Earlier in June, the European Central Bank surprised financial markets by increasing the size of its own emergency bond buying by €600 billion and saying the purchases would run six months longer than originally planned.
Still, the pace of the rally has slowed with mounting evidence of the corporate hit from sweeping lockdowns imposed to contain the spread of the respiratory disease. European travel and banking stocks, two of the worst hit sectors during the health crisis, remain more than 30% down on the year.
Travel and leisure stocks surged 3.3%, led by a 5.7% jump in Cineworld after the British cinema operator said it expected all of its theatres to reopen by July.
The German DAX index added 2.5%, while Italian and British bourses rose 2.2% and 2.5%, respectively.
Airline operator Lufthansa jumped 4.8% after saying late on Monday it was seeking to strike agreements with worker representatives by June 22 on how to make cuts equivalent to 22,000 full-time positions.
Germany's Zalando fell 5% following a stake sale by Swedish investment firm Kinnevik AB in the online fashion retailer.
Fewer than 10 stocks on the STOXX 600 were in the red in early trading.
Reuters
