European stocks hit a new high, wiping out heavy losses suffered during the pandemic as investors piled on economically sensitive stocks.
The Stoxx 600 index gained 1% at the start of the session on Tuesday, exceeding the previous record set in February 2020, before the coronavirus crisis triggered a sharp decline in world markets.
Stocks across Europe rebounded that day, with the UK FTSE 100 rising 1.1%, the German Dax index 1.2% and the French CAC 40 gaining 0.7%.
European stock markets have been slower to recover than their rivals on Wall Street, as the region has a greater proportion of cyclical companies whose outlook is more closely aligned with the economic outlook. The United States, on the other hand, is home to the world’s largest growth companies, particularly Technology, which may have supported rapid increases in sales during the pandemic.
The Stoxx 600 gained 9% this year after falling nearly 40% last spring and ending 2020 down 4%. The American benchmark S&P 500 increased a similar margin in 2021, but increased by more than 16% last year.
Europe’s biggest winners this year have been industries such as automakers, travel and leisure companies and banks – all of which have grown by at least 19% since the end of 2020.
Tuesday’s gains in Europe came after most of the region’s markets closed on Monday for the Easter holidays. On Wall Street, the S&P 500 reached another peak after a report showed activity in the vast U.S. services sector grew at the fastest pace on record last month – an indication that the world’s largest economy is rebounding at a rapid pace from the crisis of Covid-19.
“We believe investors shouldn’t be afraid to enter the market at record levels,” said Mark Haefele, investment director for global wealth management at UBS, referring to US equities. “We recommend continuing to position ourselves for the reflation trade as the economic recovery accelerates ”.
In the latest sign of how the world’s economies are recovering from the pandemic, the British Prime Minister Boris Johnson announced on Monday that England would move to the second stage of its ‘road map’ to lift the lockdown on April 12, when premises including open-air pubs, non-essential shops, hairdressers and indoor gyms can reopen.
The outlook was more blurred in parts of continental Europe, where several countries reintroduced social restrictions following a wave of infections and slower vaccine deployments.
Still, economists expect the Eurozone economy to grow 4.2% this year, following a 6.6% decline in 2020. The UK is expected to grow at a sustained pace . slightly faster rate by 4.7% after falling 9.8% last year, according to economists polled by Bloomberg.