London — European stocks rose on Thursday as better-than-expected corporate earnings offset worries about rising cases of Covid-19 and a sharp escalation in tensions between the US and China.

Shares rallied to their strongest levels since February this week — in many countries erasing their entire slump in March when the coronavirus pandemic sent markets into freefall — as investors bet that huge stimulus has carried economies through the worst of it.

The pan-region Euro Stoxx 50 climbed 0.42% while the German DAX 30 gained 0.43% and the FTSE 100 by a similar margin. S&P mini-futures added 0.29%, pointing to a stronger open on Wall Street.

The MSCI world equity index, which tracks shares in 49 countries, rose 0.2%, close to Tuesday’s level, which was its highest since late February.

The gains came despite Washington’s order to Beijing to close its consulate in Houston, Texas amid accusations against China of spying. These had weighed on risk sentiment earlier in Asia, initially pulling shares lower before Asian stocks rebounded.

China said the order was an “unprecedented escalation” by Washington, and a source said Beijing is considering shutting the US consulate in Wuhan in retaliation. US President Donald Trump said that other consulate closures are “always possible”.

“You almost have a tug of war in markets between positives and negatives and its finally balanced. It looks like markets are pricing a V-shaped recovery so you can expect small negatives to have an outsize impact on markets,” said Justin Onuekwusi, portfolio manager at Legal & General Investment Management. “But the pullback is likely to be short-lived as there are people waiting for a dip.”

Positive corporate earnings surprises in Europe helped the mood, including from Unilever, French-Italian chip maker STMicroelectronics and vehicle maker Daimler.

Investors will be keeping a close watch on US weekly jobless claims figures due at 12.30pm GMT for the latest indications of how the novel coronavirus pandemic has affected the American economy. The US recorded more than 1,100 new coronavirus deaths for a second straight day on Wednesday.

Despite the virus being far from under control, analysts say unprecedented stimulus measures to boost battered economies continue to provide structural support for riskier assets.

“The forces of liquidity are just unparalleled ... we’re seeing what happened after the (global financial crisis, but we’re seeing it on steroids,” said Kay Van-Petersen, global macro-strategist at Saxo Capital Markets in Singapore. “It’s rare that you see both monetary and fiscal policy turned on, and then when they are they only turn on for a little bit.”

Gold glitters

In currency markets the euro was up 0.1%, close to the 21-month high of $1.1601 it touched on Wednesday as agreement between EU members on a large economic recovery fund continued to provide lift.

The dollar was down marginally against a basket of currencies and unchanged against the yen.

Gold prices rose 0.3% to $1,876.60 an ounce, a new nine-year peak, with prices up more than 23% on the year.

Investors have flocked to the safe-haven metal as they seek shelter from a potential reversal in pumped-up stock prices and a possible rise in inflation following so much monetary and fiscal stimulus.

Oil prices edged up, with US crude adding 14c to $42.04 a barrel and global benchmark Brent crude up 12c to $44.41 per barrel.


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