By Jack Denton
The momentum that carried European stocks to their highest levels in almost a year on Monday showed signs of slowing on Tuesday. Vaccine optimism and stimulus hopes continue to drive markets, as European investors eye new data confirming a contraction in the eurozone in 2020.
The pan-European Stoxx 600 (STOXX:XX:SXXP) fell 0.7% higher, while London’s FTSE 100 (FTSE:UK:UKX) opened at a one-month high and was trading 0.3% higher. In Paris, the CAC 40 (PAR:FR:PX1) was below flat, and Frankfurt’s DAX (XEX:DX:DAX) was 0.15% lower after hitting a new high on Monday.
Dow futures (DOW:DJIA) were pointing up more than 180 points, set for a strong open after trading was shut on Monday for the Presidents Day holiday. The Dow closed at 31,458 on Friday.
Data on Tuesday showed a 5% contraction in the Eurozone in 2020, with a 0.6% contraction in the final three months of the year being slightly less than what was expected. The data are the latest confirmation that the group of European economies are heading for a double-dip recession.
“While we don’t as yet have much clue in what to expect for Q1 this year, it is unlikely to be much better given the various lockdown restrictions that have been in place across France, Germany and the rest of Europe since the beginning of the year,” said Michael Hewson, an analyst at CMC Markets.
But the forces that have underpinned a bullish run in stocks, namely optimism over the rollout of vaccines to combat the COVID-19 pandemic and hopes over massive fiscal stimulus in the U.S., continue to drive markets.
“The ‘risk-on’ mood continues as equity indices around the world move further into record territory thanks to optimism on the vaccine rollout and the increasing likelihood that the U.S. will pass President Biden’s full $1.9 trillion stimulus package,” said Marshall Gittler, an analyst at BDSwiss.
Oil remains in the spotlight as crude prices hover around the highest level in more than a year. West Texas Intermediate was rising but continued to float just below $60 a barrel, after passing that psychologically important price point on Monday. Benchmark Brent crude fell slightly but remained well above $63 a barrel.
Shares in European-listed oil groups BP (LON:UK:BP) , Royal Dutch Shell , Total (MIL:IT:TOT) , and Eni (MIL:IT:ENI) all lifted at the open, but pared gains.
Elsewhere in commodities, shares in British-Swiss mining giant Glencore (LON:UK:GLEN) have surged near 2.5% following upbeat earnings results . The commodities titan posted a full-year loss for 2020 but returned to profit in the second half of the year, and will resume its dividend in 2021.
Vivendi (PAR:FR:VIV) was the biggest faller on the Euro Stoxx 50 index, dropping 2.5% in early trading after rallying more than 16% yesterday.
The move down came as investment bank Citi downgraded Vivendi stock from buy to neutral, noting the positive recent developments but “reluctantly” concluding that it didn’t warrant the current share price. The French media group announced on Monday that it may spin off the Universal Music Group business in Amsterdam and return 60% of capital to shareholders.
Shares in Adevinta (OSL:NO:ADE) , the Norwegian e-commerce and online classified-advertisements company, fell 2.5% in Oslo trading. The U.K. competition regulator, the Competition and Markets Authority, said on Tuesday morning that it objected to Adevinta’s acquisition of eBay Classifieds Group from eBay, saying the deal “may be expected to result in a substantial lessening of competition” in the U.K.