A financial trader at his desk at CMC Markets in the City of London, Britain, on April 11 2019. Picture: REUTERS/PETER NICHOLLS
A financial trader at his desk at CMC Markets in the City of London, Britain, on April 11 2019. Picture: REUTERS/PETER NICHOLLS

London — European shares on Wednesday shrugged off heavy losses for US tech stocks and a major drugmaker delaying testing of a coronavirus vaccine, as investors kept faith in an economic recovery from the coronavirus pandemic.

The broad Euro Stoxx 600 gained 0.7% in early trading, steadying after hefty declines a day earlier on a rout of tech shares, a key drivers of the stunning recovery for global stocks from coronavirus-induced lows.

London shares gained 1%, helped by a pound buffeted by worries about the chance of a no-deal Brexit that could hit Britain’s economy. Indices in Frankfurt and Paris also gained.

AstraZeneca said it has paused global trials of its experimental Covid-19 vaccine due to an unexplained illness in a study participant. The news earlier unnerved investors hoping the quick introduction of a vaccine would help accelerate the recovery for economies ravaged by the pandemic.

MSCI’s broadest index of Asia-Pacific shares excluding Japan slid 1%, with indices in Australia, China and Japan all skidding. Bond yields fell and the yen climbed to a one-week high of ¥105.93 to the dollar as investors sought safety.

Still, Wall Street futures gauges were pointing to a bounce for the S&P 500 and tech-heavy Nasdaq, up 0.5% and 1.4%, respectively.

The MSCI world equity index, which tracks shares in nearly 50 countries, was flat.

With Big Tech the main winners in the global recovery from the coronavirus, benefiting from stay-at-home spenders, investors were mostly sanguine about the sector’s prospects, even after the bruising sell-off.

The Nasdaq has lost $1.5-trillion since hitting a September 2 peak.

“This has been a correction that was probably not that surprising, given the move in August in the tech sector,” said Salman Baig, an investment manager at Unigestion, adding that the outlook for Big Tech is positive. “It’s exactly those companies that are new economy — they are benefiting because of their model, the industry, the virus.”

Those attributes have sparked heavy bets from the likes of SoftBank, which has traded heavily in tech stocks call options. The bets have unnerved investors worried about its exposure to the sector. SoftBank Group shares lost 3% in Tokyo, extending this week’s slump that has wiped $15bn from its market capitalisation.

Despite renewed appetite for stocks, safe-haven German government bond yields fell to their lowest in two-weeks. The fall in tech shares also boosted demand for US treasuries, even though heavy supply this week is expected to weigh on the bonds.

Vaccine ‘blow’

The remarkable rally in global shares from their March lows has been driven in part by expectations that a Covid-19 vaccine would be found, helping accelerate the economic recovery from the coronavirus pandemic.

Yet AstraZeneca’s move dims prospects for an early rollout of its vaccine, described by the World Health Organisation as probably the world’s leading candidate and the most advanced in terms of development. Deutsche Bank strategists called the suspension of the trials “a blow”.

AstraZeneca shares recovered ground after falling heavily in after-hours US trading, and were last down 0.6%.

Elsewhere, sterling was stalked by fears that Britain is preparing to undercut its Brexit divorce treaty. Britain will set out new details of its blueprint for life outside the EU, publishing legislation a minister acknowledged would break international law and which could sour trade talks.

Sterling dipped 0.3% to $1.2945, its lowest since the end of July, and also fell the same amount against the euro to 90.70p, its lowest for six weeks.

Reuters

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