UPDATE 1-European shares claw back losses but set for worst quarter since 2002

(Reuters) – European stock markets regained more ground on Tuesday after a brutal selloff this month, with investors measuring the impact of massive official stimulus efforts against a near total shut down in global supply chains due to the coronavirus pandemic.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, February March 30, 2020. REUTERS/Staff

The pan-European STOXX 600 index was up 1.8%, with travel and leisure .SXTP, insurance .SXIP and energy .SXEP stocks — among the biggest decliners this month — adding between 2.7% and 4.9%.

Health care .SXDP, utilities .SX6P and real estate stocks .SX86P — commonly considered defensives — also jumped about 1.5% as bargain hunters returned after a rout that erased more than $3 trillion from the value of European firms.

“There appears to be light at the end of the tunnel, but that’s not to say this health crisis is completely done and dusted,” said David Madden, an analyst at CMC Markets in London.

“There’s probably a few traders saying, ‘I know stocks are really cheap’, but at the same time don’t want to go in and buy just yet because the health crisis doesn’t appear to be getting any better.”

The benchmark index was still set to post its worst quarter in nearly two decades, as the number of COVID-19 cases continued to rise in Europe and several nations extended lockdown measures that have halted business activity and crushed sentiment.

While a record $10 trillion in monetary and fiscal stimulus has recently injected a note of calm into equity markets, indicators of future volatility .V2TX remain at levels rarely seen since the 2008 financial crisis.

Trading volumes on the STOXX 600 have also declined for four consecutive days as investors remained on the sidelines ahead of figures expected to show the extent of the economic havoc wreaked by the outbreak.

Amid fears of a deep and lasting global recession, an unexpected expansion in Chinese factory data offered a glimmer of hope for economic growth, but analysts cautioned that a durable near-term recovery was still far from assured.

“Even if risk appetite continues to improve for a while more, it is still too early to trust a long-lasting recovery,” said Charalambos Pissouros, senior market analyst at JFD Group.

“In order to change our view, a vaccine has to be ready for distribution, and the vaccine in this case is not fiscal spending or monetary policy easing.”

Export-laden German stocks .GDAXI gained 2.5%, but are still down more than 15% in their worst month since 2011.

Data on Tuesday showed unemployment in Europe’s biggest economy rose slightly in March, but the numbers did not reflect the coronavirus’ impact on the job market since figures only up to March 12 were included.

HelloFresh (HFGG.DE) jumped 12% to a record high after the German meal-kit delivery firm forecast first-quarter revenue above market expectations.

Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Shounak Dasgupta

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