European stocks close higher on Wall Street, airlines rebound

By Sruthi Shankar and Joice Alves

(Reuters) – European stock markets closed higher on Thursday as a rebound in Wall Street stocks, airline gains and upbeat earnings reports led to markets reversing early losses.

After falling 2% in morning trade, the pan-European STOXX 600 index rose 0.1% to close, marking small gains for the year.

Germany’s DAX gained 0.3%, France’s CAC 40 rose 0.9% and Britain’s export-heavy FTSE fell 0.6%, under pressure from a rise in the pound.

Stocks around the world saw a rise in volatility this week as a retail trading frenzy gripped markets in the United States, Europe and Asia, driving up some stocks that big hedge funds had been betting against.

Wall Street saw gains in technology stocks, with shares of American Airlines jumping more than 20% after the U.S. carrier was mentioned on Reddit’s WallStreetBets forum following the earnings announcement.

European travel firms Lufthansa, TUI and IAG, owner of British Airways, rose between 4.7% and 7.2%. Wizz Air and easyJet each rose more than 4.5% despite posting double-digit revenue declines in the fourth quarter.

“The UK airline is following the short squeeze in American Airlines caused by r/WallStreetBets following the Q4 earnings release,” said Jasper Lawler, head of research at LCG. “AA has abnormally high short interest, but so do other airlines given the state of the industry.”

Other European stocks that have been hotly contested this week, such as CD Projekt, Ambu and Varta, continued to rise, while Nokia shares fell 13%.

Investors ignored strong profits from Apple and Facebook, as well as the US Federal Reserve’s promise to keep monetary policy loose, as concerns about the slow rollout of COVID-19 vaccines and further restrictions in Europe soured sentiment.

“With valuations at levels that already factor in a significant portion of the post-pandemic recovery, which is far from over, such corrections are always possible,” Ian Williams, economic and strategy research analyst at Peel Hunt, said in a note.

Germany is preparing entry restrictions for travellers from the UK, Brazil and South Africa, with the health minister predicting that the current shortage of coronavirus vaccines will last until April.

Meanwhile, the European Union has warned pharmaceutical companies such as AstraZeneca that it will use all legal means and even block exports if they do not agree to deliver the promised doses. (nL8N2K32GW)

Shares of the world’s largest spirits maker, Diageo, rose 3% after the company reported a surprise increase in net sales growth in the first half of the year, helped by strong U.S. demand.

Shares of Swedish medical equipment maker Getinge rose 9% after posting strong quarterly results as the company saw demand for ventilators and other advanced life-support equipment surge in 2020 due to the pandemic.

(Reporting by Sruthi Shankar in Bengaluru and Joice Alves in London; Editing by Arun Koyyur and Mark Heinrich)