European Shares Surge On Vaccine-Related Hopes

European stocks tracked a global market rebound Tuesday, boosted by hopes that vaccines will work to stem the tide of surging omicron cases.

However, a brewing energy crisis appeared to loom with a key Russian pipeline reversing course and raising questions about whether politics were behind the reversal.

The Stoxx Europe 600 index SXXP, +1.36% rose 1.2% to 472.92, following a roughly 1.4% decline on Monday, the biggest drop since Nov. 26, as investors panicked over the omicron variant and fears a USD 2 trillion spending plan from Biden was running into trouble, with concerns that the failure of the spending proposal and the spread of omicron would hamstring US economic expansion in coming years.

Biden administration was set to announce a plan to combat the new phase of COVID, including distributing some 500 million free COVID-19 tests to Americans starting in January.

In Europe, Germany will reportedly announce New Year’s Eve restrictions, and in Spain, Catalonia is expected to become the first region to announce measures to curb surging cases.

The German DAX DAX, +1.33%, French CAC 40 PX1, +1.34% and FTSE 100 UKX, +1.28% all rose by 1% or more.

In addition to COVID-19, Europe’s economy was also facing down a continuing power crunch, with natural-gas futures spiking to new highs as winter arrives. The surge came as Russian shipments to Germany that had been slowing since Saturday reportedly reversed direction on Tuesday.

European natural-gas futures GWM00, +21.56% surged at least 15% on Tuesday, with German and French power prices climbing more than 10% and the latter forced to turn on oil-fired units to keep power going, Bloomberg reported. That is as temperatures have turned frigid across parts of Europe.

Shortages in France come after nuclear power group Electricite de France last week said it would be forced to halt several reactors due to faults found during inspections, putting even more pressure on power grids. The power shortages boosted stocks in the power sector, with EDF EDF, +3.82% up 3.7%, Siemens Gamesa Renewable Energy SGRE, +3.78% climbing 5% and Siemens Energy ENR, +3.12% up 3.5%.

BP BP, +2.49% BP, +2.62% and Royal Dutch Shell RDSA, +2.75% RDS.A, +2.28% were up over 2% each, as oil prices CL00, +3.09% BRN00, +2.74% also rose.

Banks, semiconductors and pharmaceutical companies were also among the session’s big gainers.

Hard-hit travel companies were seeing some respite in Tuesday’s bounce for stocks, with shares of Ryanair RYA, +10.89%, TUI TUI, +6.82% and Deutsche Lufthansa shares LHA, +5.75% rising by at least 3%.