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European shares gain on China trade data, easing coronavirus fears

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Via Yahoo Finance

By Sagarika Jaisinghani

(Reuters) – European shares rose on Tuesday as better-than-expected trade data from China added to relief from signs that sweeping lockdowns to contain the coronavirus pandemic were working.

The pan-European STOXX 600 index <.STOXX> was up 0.9% after a strong finish last week that was powered by another aggressive round of stimulus and tentative signs of the virus peaking in some hot spots.

Spanish shares <.IBEX> gained 0.8% as some businesses re-opened on Monday, although shops, bars and public spaces were set to stay closed until at least April 26.

Almost all the major European country bourses were trading higher, with sentiment lifted by data showing a smaller-than-expected decline in China’s exports and imports. Analysts, however, warned a sure-footed recovery was months away.

“Financial markets have started to take a more open and reassuring view with the cumulative fatalities outlook peaking across the globe,” said Stephen Innes, chief global markets strategist at AxiCorp.

“Still, a return to business will be impossible until we have a vaccine, although the increase in trace and testing protocols should allow a good chunk of the economy to restart with social distancing guidelines in place.”

The benchmark STOXX 600 index <.STOXX> has recovered about 24% – or nearly $2 trillion in market value – in the past month, fuelled by a raft of global fiscal and monetary stimulus, including the half-a-trillion euros worth of support for European economies announced last week.

Although the index remains 23% below its mid-February record highs, Europe’s volatility gauge <.V2TX> has steadily declined since hitting a record high mid-March and is now at levels last seen in 2015.

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The focus this week will also be on U.S. corporate earnings for a first glimpse of the business havoc wreaked by the health crisis. In Europe, earnings for STOXX 600 firms are expected to decline 15.7% in the first quarter and 30.2% in the second.

“Even though there will be a recession in earnings and they might fall even more than during the financial crisis, they will also bounce back much quicker,” said Simona Gambarini, markets economist at Capital Economics.

“So investors might look through a period of weakness because ultimately, it doesn’t quite matter as much if the weakness is only temporary.”

Health care stocks <.SXDP> led gains among the major European subsectors, with AstraZeneca <AZN.L> surging 5.5% after saying it would start a clinical trial to assess the potential of Calquence in the treatment of severe COVID-19 patients.

Swedish rare disease drugmaker Sobi <SOBIV.ST> jumped 6.6% to the top of the STOXX 600 after reporting stronger-than-expected first-quarter earnings as the pandemic spurred higher demand for some of its pharmaceuticals.

London’s FTSE 100 <.FTSE> lagged the broader rally, weighed down by a slump in British American Tobacco <BAT.L> on reports of a U.S. criminal probe and on signs Britain will remain under lockdown for a longer period. [.L]

(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Arun Koyyur and Saumyadeb Chakrabarty)

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