(Bloomberg) — European equities bounced back in a broad-based rally on Monday after ending last week with their worst weekly drop since July, climbing along with S&P 500 futures while the U.S. stock market was closed for the Labor Day holiday.
The Stoxx Europe 600 Index was up 1.7% at the close in London, the most since Aug. 11, as S&P futures reversed losses to trade 0.5% higher. Nasdaq 100 futures remained negative, however, down 0.3%.
Britain’s FTSE 100 rose 2.4%, the most since June 16, an outperformance helped by a sharp slide in the pound on worries the U.K. is inching closer to a no-deal Brexit. The country’s equity benchmark and currency have a relatively strong negative correlation.
Stocks moved higher on Monday even as around Europe, Covid-19 cases were spiking again, with the pathogen spreading in France at a “worrying” pace, and Denmark re-introducing a number of coronavirus-related restrictions.
Jason Sippel, head of global equities at JPMorgan Chase & Co., said that over the past few months, the market has become “much more sophisticated” about what Covid-19 data it reacts to, and a pick-up in infections no longer causes a sharp selloff.
“The market has become much more nuanced in its response to Covid news, it’s no longer just focused on the infection rate,” he said by phone. “The market’s response has become much more subtle as during the course of the year we’ve learned much more about this disease.”
Bull Market Not Derailed
Investors have recently been more worried about frothy valuation levels in the U.S. tech sector than about the spread of the virus. Last week, European equities tumbled along with U.S. stocks as investors exited some of this year’s biggest winners amid concerns about stretched valuations.
While stock markets are vulnerable to a correction in the near term, especially if economic recovery starts to lose momentum, there aren’t enough reasons to derail the bull market, Goldman Sachs Group Inc. strategist Peter Oppenheimer said.
“Policy support remains very supportive for risk assets,” the strategist wrote in a note. “There is both a central bank ‘put’ — a belief that central banks will be there to provide as much liquidity as is required — and a fiscal ‘put’ as governments have scaled up their willingness to support growth.”
Automakers featured among the top gainers on Monday, with a gauge for the sector hitting its highest level since late February, helped by an upbeat note from JPMorgan on the sector. Among individual stocks, Italian payment services company Nexi SpA was the top performer in the Stoxx 600, rising 7% after a report by il Sole 24 Ore that the company resumed its merger talks with SIA SpA.
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