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An empty tourist boat travels past St. Paul’s Cathedral along the Thames river in London, England.
andy rain/Shutterstock
European stocks made substantial gains on Wednesday, as investors shrugged off the U.K. economy’s record collapse in the second quarter.
The pan-European Stoxx 600 SXXP, +1.11% index climbed 1.1% after a slow start to the day. The French CAC PX1, +0.90% also made strong gains in the afternoon to trade 0.9% up and the German DAX DAX, +0.86% erased early losses to rise 0.9% for the day.slipped 0.2%. After a late tech-led selloff on Wall Street on Tuesday, U.S. stocks DJIA, +0.88% SPX, +1.42% COMP, +2.16% moved higher in early trading, as investors looked forward to earnings from Lyft LYFT, +0.37%, Vroom VRM, +2.87% and Cisco CSCO, +1.47% among others.
The FTSE 100 UKX, +2.04% was 2% higher despite U.K. gross domestic product plunging 20.4% in the second quarter, but the more domestically focused FTSE 250 MCX, +0.51% rose 0.5%. The pound GBPUSD, -0.03% was largely unmoved against the dollar following the GDP data.
The U.K. economy’s record fall in the second quarter was the worst performance of any major European economy during the pandemic, as it officially entered recession. GDP plunged 20.4%, double the hit taken by Germany. However, it was above economists’ expectations of a 21.2% decline and there were signs of a recovery as the economy bounced back 8.7% in June, also above expectations.
Dean Turner, UBS Global Wealth Management economist, said the data showed the worst was behind the U.K. economy.
“In our view, U.K. assets look undervalued. In this environment we continue to maintain a preference for U.K. equities relative to other eurozone stocks, and expect sterling to strengthen versus a weaker dollar over the next 12 months,” he added.
The threat of a second wave of the pandemic remained heightened, with cases in France nearly doubling in the past 24 hours and the German daily infection rate rising above 1,000 for the fourth time in a week.
Stocks in focus
Just Eat Takeaway TKWY, +3.17% stock rose 3.2%, after the food delivery company reported surging revenue and orders in the first half of the year when it benefited from coronavirus lockdowns across Europe. However, the company said pretax losses widened to €121 million, from €7 million a year earlier, mainly driven by costs related to the merger between Just Eat and Takeaway.com and the proposed acquisition of Grubhub GRUB, +4.67%.
Admiral Group ADM, +7.24% shares climbed 7.3% in early trading, as the U.K.-listed insurance company said it would pay the special dividend it deferred at the height of pandemic after a 31% rise in first-half pretax profit.
