European stocks rebound despite second lockdowns

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·3 min read

Watch: UK faces lockdown as COVID-19 cases surge

Stocks markets across Europe rebounded on Monday, despite news over the weekend of a second lockdown in England.

UK prime minister Boris Johnson said in a televised address on Saturday (31 October) evening that all non-essential shops across England would be ordered shut from this Thursday. People will be told to stay home as much as possible, with restrictions remaining in place until at least 2 December.

The FTSE 100 dipped at the open on Monday but ended the day with gains of 1.4%.

Russ Mould, investment director at AJ Bell, said: “The bulk of the FTSE 100’s earnings coming from overseas, so a lockdown in England might not be the hammer blow that it first seems.”

Mould added that the lockdown increased the chances of the Bank of England injecting fresh stimulus later this week when the Monetary Policy Committee meets. Quantitative easing has historically helped to boost asset prices of things like stocks.

Britain's prime minister Boris Johnson speaks during a press conference at 10 Downing Street in London on 31 October. Photo: Alberto Pezzali/AFP
Britain's prime minister Boris Johnson speaks during a press conference at 10 Downing Street in London on 31 October. Photo: Alberto Pezzali/AFP

The FTSE’s rise mirrored other major European markets: Germany’s DAX (^GDAXI) rose 2%, France’s CAC 40 (^FCHI) added 2.1% in Paris, and the IBEX 35 (^IBEX) rose 2% in Madrid. European stocks were buoyed by better-than-expected eurozone manufacturing data from IHS Markit.

READ MORE: England goes into second lockdown for one month

Wall Street joined the global rally when trading got underway in New York. The S&P 500 (^GSPC) was up 1.3% by the time Europe, while the Dow Jone (^DJI) was 1.7% higher and the Nasdaq (^IXIC) had gained 0.5%.

Markets around the world are recovering from their worst week since March. The FTSE 100 fell almost 5% last week as fears gripped investors about looming lockdowns across Europe.

WATCH: What do the new lockdown rules mean for me

“It will be interesting to see whether stocks will be able to hold onto their gains amid more lockdowns in Europe, rising new virus cases and deaths, and not to mention the fact it will be US presidential election tomorrow,” said Fawad Razaqzada, market analyst at ThinkMarkets. “I would be very surprised if investor appetite for risk does not decrease.”

Tuesday marks the US presidential election, with Democratic challenger Joe Biden retaining a lead in the polls ahead of the final stretch.

READ MORE: Primark parent estimates £375m loss of sales

While the FTSE 100 rallied, the more domestically-focused FTSE 250 (^FTMC) fell 0.2%. Sectors such as travel and High Street retail suffered, while supermarkets and takeaway businesses rallied.

Shares in online supermarket Ocado (OCDO.L) leapt to the top of the FTSE 100. The business announced two multi-million pound M&A deals and benefitted from expectations that another lockdown would lead to booming orders.

“The hope for Ocado is that this second period of lockdown will solidify consumers around the notion of online shopping, thus changing habits for the long-term,” said Joshua Mahony, senior market analyst at IG.

Just Eat Takeaway (JET.L) road the same wave, sending the stock up 2.2%.

Essential retailers like supermarkets rose on expectations of busier weeks ahead. Sainsbury’s (SBRY.L) and Tesco (TSCO.L) both gained over 2%.

Retailers with large store estates that will now be shut suffered. JD Sports (JD.L) was the biggest faller on the FTSE 100, down 6.7%. Primark-owner Associated British Foods (ABF.L) initially fell 2.8% as it warned the second lockdown would hit its business. However, it closed up 1.4%.

Stock had rallied strongly during the Asian trading session. Japan’s Nikkei (^N225) ended the session up 1.4%, the Hong Kong Hang Seng (^HSI) gained 1.5%, and the Shenzhen Component (399001.SZ) rose 1.4%. The Shanghai Composite (000001.SS) closed flat.

Asian equities were boosted by stronger than expected Chinese manufacturing data, suggesting continued momentum for the rebound in the world’s biggest economy.