(Reuters) – European shares bounced on Monday as a slowdown in coronavirus deaths raised hopes that nationwide lockdowns were starting to show results, while Rolls Royce soared after becoming the latest company to shore up liquidity to weather an economic slump.
Italian .FTMIB and French .FCHI bourses jumped 3.2% and 3.6%, respectively, as data showed Italy reported its lowest daily death toll in more than two weeks on Sunday, while France’s death toll dropped and admissions into intensive care slowed.
“The (moves this morning) suggest that if we continue getting less and less cases day by day, equity markets may set the stage for a decent recovery,” said Charalambos Pissouros, senior market analyst at JFD Group.
“That said, another round of record numbers may be enough to turn things upside down again. This would mean that the worst is not behind us yet and that the economic wounds could still deepen and drag longer than previously anticipated.”
The benchmark STOXX 600 index was up 2.8%, after ending Friday with its sixth weekly decline in seven as the health crisis stalled business activity and prompted firms to suspend dividends and share buybacks.
British aero-engine maker Rolls Royce (RR.L) jumped 15.6% after losing more than half its value this year, as it added a new line of credit, boosting its overall liquidity to 6.7 billion pounds ($8.25 billion), even though it suspended its dividend for the first time since 1987.
Peugeot-owner PSA (PEUP.PA) gained 8.7% after announcing a further 3 billion euros ($3.3 billion) worth of loans on top of undrawn credit lines of the same amount.
The STOXX 600 index has lost more than $3 trillion in market value since February on fears of a global recession as entire sectors teetered on the brink of collapse. U.S. jobless claims soared past a record 6 million last week, while Spain has shed 900,000 jobs since the lockdown began in mid March.
Analysts now expect a European earnings recession to deepen this year despite extraordinary fiscal and monetary stimulus globally, with Goldman Sachs predicting a 38.4% slump in euro area real GDP in the second quarter.
“To successfully re-open economies without fear of subsequent mini shutdowns, we will need the antibody test rolled out so that a certain part of the population can work through regardless of the state of the viral spread,” said Jim Reid, strategist at Deutsche Bank.
“That will be the real breakthrough until we get a vaccine.”
Gains for UK’s FTSE 100 .FTSE were capped by reports that British Prime Minister Boris Johnson was in the hospital due to persistent coronavirus symptoms, 10 days after testing positive.
Legal & General Group (LGEN.L) surged 19.2%, recovering sharply from last week’s losses after the insurer said it planned to pay its 2019 dividend even after a European Union regulator said insurers should temporarily halt payouts.
Finnish department store owner Stockmann (STCBV.HE) plunged 31.2% after saying it had decided to file for a corporate restructuring due to the drop in customer volumes caused by the coronavirus outbreak.
Reporting by Sagarika Jaisinghani in Bengaluru, Editing by Bernard Orr and Arun Koyyur