Europe midday: Shares stay upbeat on US stimulus; UK wary on Covid curbs

European stocks remained in positive territory at lunchtime on Monday, still driven by US stimulus hopes, although the prospect of tighter coronavirus restrictions in the UK dampened London sentiment.

The pan-European Stoxx 600 index had gained further ground and was up 0.53%, while all other major bourses were ahead. London’s FTSE 100 was flat and US futures were all marginally higher.

Market watchers were still eyeing a second stimulus package in the US. Senate Republicans as well as House Democrats objected to the new offer from the Trump administration over the weekend.

In the UK, new local lockdown rules are set to be introduced for England, with Liverpool expected to face the toughest restrictions, although the government faced a rebellion from local councils over the level of financial assistance that would be provided to hardest-hit areas.

Prime Minister Boris Johnson was expected to outline a new three-tier alert system for England which will divide regions up as being on ‘medium’, ‘high’ or ‘very high’ alert. Johnson is due to chair a meeting of the emergency Cobra committee and will then announce the changes in the Commons, with a press conference scheduled for 1800 BST.

Market participants were also mulling news that the Bank of England has asked high street lenders to detail how prepared they are for negative interest rates.

IG analyst Joshua Mahony said: "While negative rates are unlikely to result in a situation where you are paid to take out a mortgage, the shift could seek to push wealthy individuals and corporations to invest rather than sit on a stockpile of cash.

"US bond markets are closed for Columbus Day, so some traders will expect to see a less America-centric tone to the day ahead. However, stimulus talks in congress remain one of the key elements driving market sentiment as we move forward. With around three-weeks left until the election, Biden’s lead in the poll could point towards a substantial fiscal package coming into play should the Dems take congress.

"However, for now it is clear that perhaps the most we can hope for is a trimmed-down, targeted package to address those areas where stimulus cannot wait."

KPN shares were up 7%, having been almost 10% higher at the open, after Bloomberg reported that private-equity group EQT was considering a takeover offer for the Dutch telecom.

Rolls-Royce shares continued to recover after last week’s share price surge saw the best weekly performance in more than 30 years.

"While some have suggested that part of the rebound may have been partly driven by bid speculation, this seems unlikely given the failure of KIO and Singapore’s GIC in this regard, with the UK government's golden stake a big obstacle," said CMC Markets chief analyst Michael Hewson.

"It seems more likely that having removed the doubts over its short-term future, with the securing of extra funding, investors are taking a longer-term view that the company is now in better shape to reorientate its business model to deal with the challenges of the next ten years."

Shares in gambling group GVC Holdings fell as the company said profits would fall by £40m on the back of four new licences in Germany under a new regime of restrictions to protect punters.

Aveva shares fell as the software maker said interim revenues would be in line with expectations, but lower than last year.

Shares in airline group IAG were hit by early turbulence today as British Airways chief executive Alex Cruz was replaced by Aer Lingus boss Sean Doyle as the company tries to cope with crisis caused by the Covid-19 pandemic.