European stocks rally after steep early losses, with investors looking at past weakness on Wall Street overnight on waning US stimulus hopes partially offset by reports of new UK government tax measures in the works.
And despite recent selling pressure, some equity strategists were sounding an optimistic note.
“The global economy rebounded in the third quarter, led by the United States, and a COVID vaccine now looks likely by the end of the year,” analysts said. Barclays Research.
“While the US presidential election is a near-term downside risk, we are overweight global equities over fixed income, given the recovery, central bank support and potential vaccine approval.”
The pan-European Stoxx 600 index was down 0.38% to 358.21, although fears that tighter coronavirus restrictions were almost inevitable in the UK kept London’s FTSE 100 down 0.29% lower at 5883.97.
To alleviate these concerns, investors were also awaiting details of a new employment support program from Finance Minister Rishi Sunak.
In the eurozone, France’s CAC reversed a decline of nearly 1% to offset just 0.06% at 4,799.29, the German DAX in the green 0.15% to 12,661.38, even after that Wednesday’s PMI readings showed the services sector in both countries had started contracting again in September.
Europea’s early sale of shares was driven by fears that the US Congress will not agree to additional fiscal stimulus to address the current Covid-19 crisis, meaning there may not be more support before 2021.
In London, Sunak on Wednesday canceled the planned budget for next month and was due to announce a new support program later Thursday to replace the holiday program that ends at the end of October.
Speculation has focused on wage subsidies and targeted aids for exposed sectors, such as leisure and hospitality, which have been hit by further restrictions on trading hours.
On the stock market, engine maker Rolls-Royce and GKN owner Melrose Industries were reeling again amid concerns about the impact of Covid-19 on the airline industry.
IAG, Airbus, InterContinental Hotels and easyJet, owner of British Airways and Iberia, also traded lower.
Elsewhere, Smiths Group was in the red after posting a decline in annual profit, but reinstated its dividend and said its business was stabilizing.
Cineworld sank after saying it lost in the first half after its theaters were forced to close in March due to the pandemic and warned it would need to raise additional cash if its theaters were closed again .