Europe close: Stocks, euro near one-month highs ahead of results season
By Alexander Bueso
Date: Monday 13 Jul 2020
(Sharecast News) - Stocks in Europe finished the session at their best level in over a month ahead of the start of the second quarter earnings season, even as the single currency continued to bound higher.
Adding to the positive tone in stocks, shortly after midday, America's health regulator, the Food and Drug Administration, granted 'fast-track' designation for two Covid-19 vaccine candidates from BioNTech and Pfizer.
Asian stocks also traded higher overnight, on top of merger news on both sides of the Atlantic both of which served to further boosted investor sentiment on Monday.
There was also some good news to be had on the economic front.
Germany's Dax was up by 1.32% at 12,799.97 and near five-month highs having come withing a whisker of its early June highs around 12,848.
The Stoxx 600 meanwhile was ahead 1.0% to 370.50, with shares of Neles Oyj rocketing to the top of the leaderboard for the pan-European gauge.
Earlier, Swedish engineer Alfa Laval had tabled a $2.0bn bid for the Finnish valve maker.
To take note of, Stateside, chipmaker Analog Devices launched a nearly $21bn bid for rival Maxim Integrated.
Back in the Nordics, stock in DNB ASA, Norway's second-largest lender, was catapulted higher on the back of better-than-expected second quarter earnings.
Milan's FTSE Mibtel was the day's lagger, trading up by 1.19% to 20,003.25, even after ratings agency Fitch reaffirmed its rating and outlook for the country's long-term debt after the close of trading on Friday.
Weighing on Italy's top-flight index, the country's media reported that Prime Minister Giuseppe Conte had labelled toll-road operator Autostrade's latest proposal to avoid losing its licene "insufficient".
Shares in Atlantia, which owns an 88% stake in Atlantia, were duly sent lower by over 15%.
Mimicking the move in Europe's main stockmarket gauges, euro/dollar added 0.61% to 1.1362 and was also to be found near one-month highs.
In the background, the focus was on the start of the second quarter earnings season on both side of the Atlantic and whether companies' guidance would validate forecasts for a sharp recovery in profits in 2021 - despite the risk of tax hikes under a Biden administration in the case of the States.
According to JP Morgan's Mislav Matejka, there was a "low hurdle" for second quarter corporate earnings, given IBES forecasts for a 45% and 59% drop in S&P 500 and Stoxx 600 earnings versus a year ago - but that wouldn't last long, he added.
"We believe that one needs to see continued acceleration in activity momentum in 2H, beyond just a technical bounce from depressed levels that we expected will be seen in May/June, and probably July, prints.
"We fear that this is unlikely to be achieved, activity momentum could stall after July, or even outright dip lower, as pent up demand is exhausted, COVID-19 and trade uncertainty lingers and labour market stabilization slows."
There was also much expectation - when not concern - ahead of the European Union leaders' summit scheduled for the end of the week, where the bloc's leaders would try to thrash out the terms of the proposed €750bn reconstruction fund.
On a positive note, French finance minister, Bruno Le Maire, said that Paris would unveil a "massive" programme to boost youth employment with a broader stimulus package - including corporate tax cuts - due to follow at the end of August.
Further south, reports at the weekend suggested that the Spanish government might be prepared to shelve plans for tax hikes and to defenestrate the prior government's labour market reforms.
The number of Covid-19 cases in Spain picked up noticeably at the weekend, although they had since eased back, roughly halving to 164 over the past 24 hours, the country's health ministry said after the close of trading on Monday afternoon.
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