European Stock Rally Falters as Virus Cases Surge

Jan 11 Reuters European stocks fell from over 10month highs on Monday after rallying last week, as investors feared a surge in coronavirus cases across the continent and mainland China could delay an economic recovery.

The panEuropean STOXX 600 index fell 0.4, easing from its February 2020 peak hit on Friday. Germanys DAX index shed 0.7 after hitting alltime highs last week and Frances CAC 40 was down 0.5.

Stock exchange operator Euronext said it had resolved a technical issue that affected trading on futures contracts tied to the CAC 40.

Investors piled into undervalued segments of the market including banks, energy and mining last week after a blue sweep in the crucial U.S. Senate runoff elections in Georgia raised hopes of larger U.S. fiscal stimulus. Wall Street and Asian stocks hit alltime highs last week, while UK equities added more than 6.

Whats driving the market is optimism that we will have more U.S. fiscal stimulus, but the question is are all the prerequisites for a real reflation in place, said Elwin de Groot, Rabobanks head of macro strategy.

I would say the answer to that is no. We still need to cope with the new wave of virus infections, and its taking quite a bit of time in many countries to rollout vaccines.

Germany reported an increase in coronavirus cases even as most of Europe was under the strictest restrictions, while China saw its biggest daily increase in infections in more than five months.

In an effort to curb the spread of the virus,…

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