In Europe, A Melt-Up

In Europe, A Melt-Up

Although these kinds of brief articles are (by definition) stale by the time most folks get around to reading them, I think it’s (more than) apt to point out that European shares enjoyed a veritable melt-up to kick off the new week.

Why, beyond the obvious, does this deserve separate (albeit brief) treatment?

Well, for one thing, the Monday rally in Europe stood in stark contrast to the malaise in Asia, and made for a particularly glaring juxtaposition with the rout in Hong Kong and attendant deep-dive in mainland Chinese shares.

So, it’ll be interesting to see how this apparent discrepancy “resolves” on Tuesday and throughout the rest of the week.

Beyond that, the sheer magnitude of the move made it difficult to ignore. 2.1% (on the regional benchmark) doesn’t sound like a lot, but consider that it counted as The Stoxx 600’s largest single-session gain since “Pfizer day” in November.

The rally played out against a smattering of ostensibly positive virus headlines. Boris Johnson, for example, said 1/3 of the UK’s population has been vaccinated.

European shares also seem to have piggybacked on David Tepper’s bullish comments to CNBC.

The reflationary vibes were strong. Cyclicals surged nearly 4%. The list of “notables” was long, but one particularly striking chart (below) shows the Autos & Parts gauge hitting a three-year high.

Miners and banks each rose 3.5% and every country benchmark rose 1% or more.

As you can imagine, German shares were particularly buoyant. The DAX’s 3.3% gain took the index to a record high.

If that doesn’t signal optimism for a robust recovery, then nothing does.

The vibes weren’t universally positive, though. Ursula von der Leyen is furious at critics who fault The European Commission for slow vaccine rollout. “[We’re] tired of being the scapegoat,” she seethed, placing the blame on AstraZeneca.

Germany is angling to ramp up vaccinations to 10 million per week starting later this month. So far, the country has managed just over 7 million doses since it began inoculating its population.

Italy barred a shipment of Astra’s shot from going to Australia last week, a move von der Leyen said she supported. “[If they] cannot explain why they didn’t deliver in Europe, we have a problem with doses produced here going somewhere else,” she chided, in Brussels.

Vaccine nationalism.


 

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