WATCH: European stocks rise as Barclays says buy the decline
European stock markets saw small gains on Friday, as investors looked beyond bullish calls from investment banks and instead focused on consolidating recent gains in the face of the ongoing second wave of COVID-19.
Stock markets were mixed as they opened on Friday, with most markets almost flat. The indices gained ground in the first trades and were in the green at the close.
The DAX (^ GDAXI) ended up 0.4% in Frankfurt and the CAC 40 (^ FCHI) 0.3% in Paris.
“The provisional European gains … appear to maintain the ongoing consolidation phase as markets tread on water following the increase in vaccines seen over the past two Mondays,” said Joshua Mahony, analyst market leader at IG.
The FTSE 100 (^ FTSE) closed 0.3% higher in London. The index had risen 0.8% earlier in the session after better than expected UK retail sales data. Meanwhile, Barclays Economics has revised its forecast for UK GDP growth next year up by 1.6 percentage points. Bank economists now expect the UK economy to grow 5.4% next year.
Traders have ignored the news that UK government debt continues to skyrocket, reaching nearly £ 2.1bn ($ 2.8bn).
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The moderate performance of European indices came despite bullish calls from several investment banks.
Analysts on Barclays’ European Equity Strategy team have advised clients to buy stocks following a recent price drop, saying “the outcome of the two-year flight to safety was just to start.”
Meanwhile, UBS has asked its wealthier clients to invest more money in stocks. In a note sent on Friday, UBS Wealth Management said interest rates are expected to stay at historically low levels next year given high levels of debt around the world. Accordingly, investors should seek returns other than cash.
“We believe the potential for continued financial repression underscores the importance of owning ‘real’ assets such as stocks,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.
“We recommend that investors seek secular long-term growth and consider increasing returns through exposure to private markets.”
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Morgan Stanley reiterated its bullish call on European stocks. Analysts said in a note released Friday that MSCI Europe could gain 10% next year.
Despite these bullish calls, activity in Europe was subdued. Barclays called the atmosphere “Hope v Reality”.
“Vaccine breakthrough strengthens hope for a return to normalcy, but investors face a potentially foggy winter if infections continue to soar,” wrote Barclays’ equity strategy team, led by Emmanuel Cau.
US stocks were down. The S&P 500 (^ GSPC) was down 0.3% at the end of trade in Europe, while the Dow Jones Industrial Average (^ DJI) was down 0.5%. The Nasdaq (^ IXIC) was flat.
Stock markets mostly rose in Asia overnight. Hong Kong Hang Seng (^ HSI) increased 0.2%, Shanghai Composite (000001.SS) 0.4%, and South Korea’s KOSPI (^ KS11) improved 0.2 %. The Japanese Nikkei (^ N225) fell 0.4% and the ASX 200 (^ AXJO) in Australia fell 0.1%.
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