Europe open: Shares rally on US stimulus package, Brexit deal hopes
European shares rallied on Tuesday on news of a US stimulus package and indications of some movement in Brexit talks over fishing rights.
The pan-European Stoxx 600 index was up 1.08% after Monday’s sell off, sparked by concerns over a new strain of the coronavirus in the UK which saw 40 nations shut their borders in response. The UK’s FTSE 100 index had pulled itself up by 0.2%, assisted by a revision upwards in third quarter GDP figures.
Germany’s DAX and France’s CAC 40 were both up 1.3%. US Dow Jones futures were slightly lower.
“As usual, markets overshoot on the downside whenever there is trouble, which can be easily faded, and the lack of liquidity at this time of year can exaggerate moves in either direction,” said Markets.com analyst Neil Wilson.
Reports overnight that Britain had offered on fishing quotas for EU boats also lifted sentiment as both sides tried to reach a deal before the end of the transition period on December 31.
"It’s still hanging by a thread but if all that’s left is a few million euros in sardines then you’d have to think that a deal is more likely than not," Wilson said.
On the macroeconomic front, official data showed UK gross domestic product grew by a record 16% in the third quarter from an initial estimate of 15.5%, while government borrowing surged last month. This means the economy is still 8.6% below where it was at the end of last year, up from an initial estimate of 9.7% below.
Separate data revealed government borrowing rose to £31.6bn in November, compared to consensus expectations of £31.4bn. This was a £26bn increase on November 2019, which is both the highest November borrowing and the third-highest borrowing in any month since monthly records began in 1993.
Ruth Gregory, senior UK economist at Capital Economics, said borrowing will probably remain high over the next few months as new Covid-19 restrictions stay in place.
"Of course, Q3 and November are old news," she said. "And the possibility that the new Tier 4 Covid-19 restrictions are extended and broadened in the coming months means that the risks to our Q1 GDP forecast (+1.0% q/q) are weighted heavily to the downside."
In equity markets, travel stocks recovered with easyJet up 5.6% and Carnival 4.36%.
Banks were among the top gainers after heavy declines on Monday, with Lloyds, Barclays and NatWest all higher.
AstraZeneca shares were lower after the company said its experimental asthma drug tezepelumab, being developed with Amgen, failed to meet the main goal of reducing patients’ dependence on steroids while keeping the condition in check in a late-stage trial.
British Airways and Iberia owner IAG and engine maker Rolls-Royce also gained after sharp falls in the previous session.
(Michele Maatouk also contributed to this story)