What’s happening: European stocks closed higher on Friday, marking an end to their biggest losing streak since October.
What happened: Most sectors ended in positive territory on Friday, as markets reacted to the latest round of earnings and economic reports.
However, the impact of renewed lockdowns was visible in recent economic reports, which showed Eurozone’s business activity contracting for a fourth straight month.
Why it matters: European stocks are still trying to recover a year after the covid-19 first resulted in a sharp downturn.
The pan-European Stoxx 600 index gained 0.5% on Friday, after declining for the previous three sessions, with banking and travel-related stocks leading the rally. Several economically sensitive sectors recorded gains, driven by encouraging earnings reports. However, defensive sectors, including healthcare, traded lower on Friday. The index added 0.2% last week, remaining around 5% short of the record high hit a year earlier.
Tech stocks also outperformed, with chipmakers gaining after BE Semiconductor Industries and Applied Materials issued favourable projections.
Markets look forward to the vaccine-led easing of restrictions and economic recovery pushing stocks higher, especially in sectors that were worst hit by the pandemic.
Investors remained cautious, however, after a report from Bank of America showed that European equity funds had witnessed their highest weekly outflow in the last eight weeks. Although the Eurozone composite PMI improved to 48.1 in February, from 47.8 in the previous month, the reading remained below 50, indicating a contraction in business activity for the fourth consecutive month.
Germany’s composite PMI rose to 51.3 in February, from 50.8 in January, while France’s activity shrank to 45.2, from 47.7 in the prior month.
Corporate earnings remained in focus, with major companies including Renault, Allianz, Hermes International, and Swiss Re reporting their latest results before the opening bell on Friday. Renault reported a loss of €8 billion for 2020, while Hermes International surpassed market estimates driven by 16% sales growth in the fourth quarter.
London’s FTSE 100 rose 0.1% on Friday, while German DAX 30 and French 40 added 0.77% and 0.79%, respectively.
What to watch: With no major economic reports scheduled for release from the Eurozone today, investors may focus on stimulus developments in the US.
Rising covid-19 cases remain a top concern for the markets, with total global infections surpassing 111.3 million.