European stock markets rose on Tuesday despite lingering concerns over the European COVID-19 vaccination campaign, the rapid spread of cases in Germany and disappointing retail sales figures in the United States.
The FTSE 100 (^ FTSE) and DAX (^ GDAXI) were both up 0.7% in early Tuesday afternoon, while the CAC 40 (^ FCHI) was up 0.3% .
The increase came despite renewed concerns about the deployment of the COVID-19 vaccine in Europe. Several countries – including Germany, France, Spain and Italy – have decided to suspend administration of the AstraZeneca vaccine following reports of blood clotting.
READ MORE: AstraZeneca ‘under pressure’ as Europe reviews COVID-19 vaccine
The German Paul-Ehrlich Institute said it had found “a striking accumulation” of rare blood clotting problems associated with the vaccine. The European Medicines Agency (EMA) is currently evaluating the data and a verdict is expected on Thursday.
“Reports suggest these are seven severe cases out of 1.6 million doses over six weeks,” said Jim Reid, senior strategist at Deutsche Bank. “Further reading suggests that one would expect 3-4 cases per million per year of such a problem in the general population.”
Reid and his team said the decision to withhold the vaccine seemed “very prudent.”
Bill Blain, strategist at Shard Capital, said delays in the deployment of vaccines in the EU would have “market implications”. Travel stocks will struggle to recover until the continent can fully reopen, for example.
Watch: Germany, France, Italy and Spain stop use of AstraZeneca vaccine
COVID-19 cases are on the rise again in parts of Europe. Germany’s Robert Koch Institute said on Tuesday the country was “on the side of the third wave” with “exponential growth” in cases, Reuters reported.
However, Pantheon Macroeconomics’ chief eurozone economist Claus Vistesen said: “The poor vaccination effort is not a huge challenge for the general trend – Germany and the EU will get there at the end – and also remember that the rhythm of the vaccination possesses accelerated significantly over the past month.
“In addition, we also suspect EZ [eurozone] Financial markets, especially equities, are now eagerly awaiting a significant improvement in stronger global growth, mainly thanks to a US economy boosted by the stimulus and fully vaccinated. It could indeed be very tasty for ZE exporters, many of whom are key components of German stock indices and ZE large caps. “
The initial sentiment was supported by better than expected economic expectations. ZEW’s confidence surveys in Germany and the Eurozone both beat expectations.
“The further increase in expectations is consistent with market prices reflecting a reality in which the virus is a long time ago and economic activity is rapidly moving to the pre-virus level,” Vistesen said.
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In a separate survey of fund managers released on Tuesday, Bank of America said COVID-19 was not the top concern of professional investors for the first time since February 2020. The biggest challenge is now seen as the inflation.
French inflation data, released earlier Tuesday morning, showed prices rose 0.8% in February. The figure was slightly ahead of expectations.
AstraZeneca (AZN.L) stock rose 3.2% in London despite close scrutiny of its vaccine. The action was aided by a rating upgrade to ‘buy’ from Jefferies and a bullish rating from Deutsche Bank.
Stocks were not moved by weaker-than-expected US retail sales data, released around lunchtime in Europe. Official figures show sales fell 3% in February, against expectations of a 0.5% drop.
“This shouldn’t be alarming,” said James Knightley, chief international economist at ING. “The stimulus-induced surge in January has been revised even higher and with another stimulus check hitting bank accounts and the weather situation improving, the numbers for March and April will rise.”
Wall Street was largely calm in the open. The S&P 500 (^ GSPC) and Dow Jones (^ DJI) were flat shortly after the start of trading. The Nasdaq (^ IXIC) rose 0.6%.
Asian markets posted solid gains overnight after a late rally on Wall Street on Monday. The Japanese Nikkei (^ N225) rose half a percent, the Hong Kong Hang Seng (^ HSI) gained 0.6% and the Shanghai Composite (000001.SS). South Korea’s KOSPI (^ KS11) rose 0.7% and Australia’s ASX 200 (^ AXJO) gained 0.8%.
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