While markets suddenly woke up to COVID-19 risks, European stocks were cautiously higher on Monday, shrugging off investor concerns.  

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The pan-European Stoxx 600 increased 0.3% in early trade, while telecoms climbed 1.1% to lead gains as almost all sectors and major stock exchanges entered positive territory.

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After Austria imposed nationwide restrictions for ten (10) days to fight the winter virus wave, investors swiftly shifted to lockdown trading mode.

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Concerns that Germany and other countries will follow suit will force millions of people to stay at home, subsequently hitting tourism-dependent economies and outdoor businesses just before key Christmas holidays and spending.

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These developments turned the buoyant mood in European equity markets, where French and German shares hit a string of record-highs.  

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The pan-European equity index, up 80% from March 2020, slipped half a percent on Friday, while Italian and Spanish stocks look particularly vulnerable at the moment.  

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This exposure sent Nasdaq futures to new record highs overnight, favoring Big Tech and online economy names once again.

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Currently, on the corporate side, all eyes are on Telecom Italia (MI:TLIT) after the company received a $12 billion buyout proposal from U.S. fund KKR.

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According to economic surprise indexes compiled by Citi, European data lags U.S. equivalents by the highest margin in over a year, revealing ominous signs for Europe.

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“Markets have been aware for a few weeks now that this winter will be difficult and that the vaccination rollout doesn’t reduce lockdown risk by 100%.” – Head of European equity strategy, Emmanuel Cau at Barclays

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The Bank of America’s widely followed monthly investor surveys showed funds most bullish on eurozone equities, with a 33% “overweight” and EU banks, especially in favor.

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The setback will prove painful to many if it deepens.