European Stocks Weaken; Virus Causes Uncertain Outlook
-European stock markets drifted lower Tuesday, amid caution over the economic outlook given the restrictions to combat the Covid-19 surge despite the latest positive Covid-19 vaccine news.
Investor sentiment was given a boost Monday when Moderna (NASDAQ:MRNA) said its experimental Covid-19 vaccine was 94.5% effective in preventing infection, adding to Pfizer ‘s (NYSE:PFE) promising trial data last week.
However, the near-term economic outlook remains dim, with many European countries resorting to partial lockdowns to try and combat the recent surge in coronavirus cases throughout the region as the colder weather forces people inside. Germany, which is struggling to bring its infection rate down, largely put off major decisions on new restrictions at a high-level meeting on Monday.
The European Central Bank has already hinted at further action when it next meets in December, but the central bank can only really provide cheap liquidity to support the real economy. Most needs to come from fiscal policy, and there was a setback there on Monday with Hungary and Poland blocking the adoption of the 2021-2027 budget and the 750 billion euro recovery fund.
Additionally, investors have started to reassess the situation amid worries over vaccine production and delivery, and given the ever-increasing number of coronavirus cases globally, particularly in the U.S..
The United States recorded more than one million new Covid-19 cases last week, with new infections rising in every state except for Hawaii, according to Reuters data, while deaths increased 12% in the week ended Nov. 15.
In corporate news, easyJet (LON:EZJ) stock fell 4.4% after the budget airliner swung to a loss in fiscal 2020 as revenue was hit hard by the pandemic and said it will operate at only 20% capacity in the current quarter. It also declined to pay a dividend.
On the flip side, Dassault Systemes (PA:DAST) stock rose 0.7% after the French technology and software company issued a new financial outlook on Tuesday, forecasting solid growth in its cash flow over the next few years.
Oil prices edged lower Monday, with eyes on the world’s top producers to see whether they will agree to a further extension of supply curbs given the hit to demand caused by the pandemic.
OPEC+, a group which includes members of the Organization of the Petroleum Exporting Countries as well as Russia, is due to hold a ministerial committee meeting later Tuesday which could recommend changes to production quotas when all the ministers meet on Nov. 30 and Dec. 1.
Expectations are growing that the group will suggest a postponement of the planned January increase in oil output for at least three months to support prices as the pandemic continues to hit demand.