European investors keep an eye on COVID comeback; threatens setback

European investors keep an eye on COVID comeback; threatens setback

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

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.

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

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.  

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.  

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

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.

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.

“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

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.

The setback will prove painful to many if it deepens.

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