European stocks hold eight-month highs despite lockdown fears

(Reuters) – European shares held near eight-month highs on Tuesday, riding a wave of optimism about a COVID-19 vaccine breakthrough, although concerns about the pandemic’s economic damage capped gains.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, November 9, 2020. REUTERS/Staff

The pan-European STOXX 600 .STOXX, which rallied 4% on Monday after positive news from U.S. drugmaker Pfizer PFE.N about its COVID-19 vaccine candidate, rose 0.9%.

The European Commission said it will approve on Wednesday a contract for the supply of Pfizer and its partner BioNTech’s 22UAy.DE potential coronavirus vaccine.

“European equity markets are consolidating following yesterday’s impressive rally,” Milan Cutkovic, market analyst at Axi, said of European shares, which have surged 12% this month.

While President-elect Joe Biden is expected to restore a calmer U.S. trade and foreign policy, strict coronavirus lockdowns have threatened a nascent European recovery.

“A large part of Europe is still in a partial or full lockdown, and it is crucial to avoid a back and forth between different levels of restrictions as this is causing significant damage to consumer and business confidence,” Cutkovic said.

The ZEW economic research institute said German investor sentiment fell more than expected in November on concerns over a second lockdown.

London’s FTSE 100 .FTSE rose 1.8%, despite data showing that British employers made a record number of staff redundant in the third quarter and the jobless rate jumped.

Italy’s bourse .FTMIB added 0.4% a day after posting its best day since March. The country is ramping up business restrictions in Tuscany and four other regions to rein in the second wave of the pandemic.

Banking .SX7P, auto parts .SXAP and energy .SXEP stocks were among Europe’s biggest gainers, while travel & leisure stocks .SXTP fell on lockdown concerns.

“Even if a vaccine proves effective, inoculating a large enough part of the population will take time and leave these segments prone to economic lockdown fallout,” Commerzbank analyst Christoph Rieger said.

In Amsterdam, shopping mall owner Unibail-Rodamco-Westfield URW.AS shares surged 21% to the top of the STOXX 600 after its shareholders voted against a planned 3.5 billion euro ($4.15 billion) rights issue.

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