European and US stocks rise as investors assess impact of Covid surge

European stocks ended higher on Monday while US equities rose for a fourth day amid thin trading with the Irish and UK markets closed for a holiday.

The Stoxx Europe 600 Index gained 0.6 per cent, extending last week’s rally and hitting its highest level in five weeks. Tech shares led the gains, tracking a surge in the Nasdaq 100 Index.

Coronavirus infections have spiked across the globe over the weekend, with France reporting a daily record of more than 100,000 new cases. Equities in the region are having a bumpy end of year as market participants weigh economic prospects amid the spread of the new omicron variant and as central banks have turned more hawkish in response to surging inflation. With only a few sessions left in the year, Europe’s main index is up 22 per cent in 2021, and less than 1 per cent from its record high.

“This week should be a transitional one, with few sessions, low volumes and not much news expected,” said Jaime Espejo, equities fund manager at Imantia Capital in Madrid. “The coronavirus threat is still very vivid as the infections rate is higher than expected.”

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In the US, the SandP 500 headed toward another record close, with all major industry groups advancing. The tech-heavy Nasdaq 100 jumped more than 1 per cent, outperforming other benchmarks. The dollar weakened and the yen lagged peers. The two-year yield rose ahead of an auction while rates in the long end edged lower.

‘Santa Claus rally’

“We like this, we love to see the Santa Claus rally continue,” Victoria Greene, founding partner and chief investment officer at G Squared Private Wealth, said on Bloomberg TV. “And I think the ability of equity markets to climb the wall of worry should not be underestimated.”

An annual event known as the “Santa Claus rally” kicked off Monday. Since 1969, the SandP 500 index has averaged a gain of 1.3 per cent over the seven-day period, which includes the last five trading sessions of the year and the first two trading days of the new year, according to The Stock Trader’s Almanac.

Megacap stocks contributed the most to the SandP 500 gains, with Microsoft and Meta Platforms, the Facebook parent company, among top performers. Tesla, headed for its biggest four-day gain since March.

Travel stocks underperformed, though pared earlier losses, after hundreds of flights were cancelled over Christmas due to a spike in Covid-19 cases. Anthony Fauci, President Joe Biden’s top medical adviser, indicated support for making vaccinations a requirement for domestic fights.

JPMorgan Chase and Co strategists said there’s little reason to fear that the rally that catapulted US stocks to successive records this year will end anytime soon. In fact, it may get broader.

Chinese authorities began widespread disinfection measures in the western city of Xi’an, where an outbreak presents one of the country’s biggest challenges. China’s central bank pledged greater economic support over the weekend, contrasting with steps by the Federal Reserve and other central banks to fight inflation by cutting stimulus. - Bloomberg