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German stocks hit record high as European banks reverse Archegos-linked tumble

European stocks continued their climb higher on Tuesday, with Germany’s key index opening to a new high, as the market seems to have shrugged off wider concerns of fallout from a major selloff last Friday linked to a $30 billion margin call.

The pan-European Stoxx 600
SXXP,
+0.45%

was 0.5% higher while both London’s FTSE 100
UKX,
+0.42%

and the CAC 40
PX1,
+0.56%

in Paris rose 0.6%. Frankfurt’s DAX
DAX,
+0.61%

lifted near 0.7%.

Dow futures
YM00,
+0.22%

were pointing up around 70 points, set for a soft but positive open after closing 98 points higher on Monday at 33,171.

Volatility remains a concern, with the yield on the 10-year U.S. Treasury — which has been a force behind stocks’ bumpy ride in recent weeks — at the highest level since January 2020. The yield on the benchmark note was above 1.77%
TMUBMUSD10Y,
1.766%
.

“If markets were worried about the spillover effects from Friday’s…block trade margin call, and the potential spill overs from the Ever Given container ship getting stuck in the Suez Canal, then yesterday’s price action suggested the fallout was fairly contained,” said Michael Hewson, an analyst at CMC Markets. European stocks ended higher after a mixed day on Monday.

The performance on Germany’s DAX index brought it to a new high on Tuesday, boosted by bank and automotive stocks, as broader concerns remain in Europe over the impact of another wave of COVID-19 cases.

Leaders in Germany and France are feeling pressure to tighten existing lockdowns over rising coronavirus disease infections. The U.K., which leads European Union countries on vaccinations, entered a new phase of reopening on Monday.

Read: Third COVID-19 wave could be the worst yet, Germany warns

Hewson said the shorter week of trading ahead of the Easter holiday, with the end of the month and quarter nearing, could lead to “a fair amount of volatility over the next couple of days.”

Bank stocks took a big tumble on Monday amid the fallout of a near-$30 billion selloff linked to a margin call on Archegos Capital Management, but have bounced back somewhat on Tuesday. Credit Suisse
CSGN,
+0.51%
,
which fell around 14% on Monday, has rebounded, with the shares up near 2%. UBS
UBS,
-2.81%

stock rose 1.5% and Deutsche Bank
DBK,
+1.81%

lifted near 2%, adding buoyancy to Germany’s DAX.

More on this: Here are the complex bets at the heart of ‘unprecedented’ Archegos-linked $30 billion margin call

“For the banks involved the losses will be painful, and probably a little embarrassing, however they aren’t likely to undermine confidence in the stability of the financial system,” Hewson said.

Auto stocks added a further boost to the German market, with shares in Volkswagen Group
VOW,
+3.57%

up near 3%, with gains also coming from BMW
BMW,
+1.43%

and Daimler
DAI,
+1.19%
.
Elsewhere in Europe, Renault
RNO,
+1.74%

stock and shares in Stellantis
STLA,
+1.21%
,
which was formed this year in a merger between Fiat Chrysler and Groupe PSA, also rose.

But the acceleration wasn’t felt by trucking giant Volvo
VOLV.B,
-1.88%
,
which saw its shares slide near 2%. Swiss bank UBS downgraded the stock to sell amid supply-chain concerns caused by the global semiconductor shortage, with a target price suggesting the shares could drop 18%.

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