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European stocks gain on indications over earnings

European stocks

The STOXX index of 600 European shares rose 0.7% at 436.76 points

Global stocks gained on Wednesday as early indications of a rebound in European corporate earnings offset concerns over rising COVID-19 infections in Asia that have dampened oil prices.

The STOXX index of 600 European shares rose 0.7% at 436.76 points. Analysts said a 1.9% fall on Tuesday, its worst session this year, was overdone and the benchmark remains near its record high of 443.61 points hit on Monday.

MSCI’s index of global shares dropped 0.2%. It too had hit record highs on Monday.

We have seen seven weeks or so of gains predicated on the recovery trade, said Michael Hewson, chief markets analyst at CMC Markets. It was priced to perfection and with events in Japan and India ahead of earnings, maybe there were going to be a few potholes along the way, a little bit of risk correction.

Recent optimism about rising vaccination rates in the US, Britain and the EU is shifting to worries that record coronavirus infections in India and a reinforcement of travel restrictions will slow down the world economy.

Stocks in Tokyo also declined 2% due to the growing likelihood that Tokyo, Osaka and surrounding areas will be put under lockdown due to a new wave of Covid infections.

Europe kicked off an earnings season that is expected to deliver 61% profit growth, its biggest surge in more than nine years, on the back of recovery from economic lockdowns.

Tech stocks were the top gainers, up almost 2%, with semiconductor equipment maker ASML climbing 5.4% after it raised its full-year sales forecast, citing strong demand amid a global computer chip shortage.

Crude futures extended declines from a one-month high on speculation that Covid restrictions in India, the world’s third-largest oil importer, will hurt energy demand.

U.S. crude slumped 0.4% to $62.44 a barrel, while Brent crude lost 0.2% to $66.40 per barrel.

Renewed concerns about the global economic recovery weighed on commodity prices and commodity currencies. Many countries around the world, such as India and Brazil, set new records for infections and deaths, analysts at Commonwealth Bank of Australia said in a research note.

Analysts said they were looking for steers from the European Central Bank on Thursday, followed by the Federal Reserve and Big Tech earnings on Wall Street next week.

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