UKX FTSE 100 Index

By Victor Reklaitis, MarketWatch

Analyst: Rebound is 'a welcome respite after two weeks of sharp falls'

European stocks stepped higher Monday, erasing part of their sizable monthly loss.

Analysts attributed the upbeat action in part to an encouraging finish on Friday for U.S. equities, but noted global markets remain down in a big way so far in February.

What are markets doing?

The Stoxx Europe 600 index climbed 1.6% to 374.66.

On Friday, the pan-European benchmark fell 1.5% and suffered its lowest close since August. It also notched a weekly drop of 5%, its biggest percentage fall since January 2016.

In early action Monday, Germany's DAX 30 index put on 2.1% to 12,359.95, while France's CAC 40 gained 1.7% to 5,163.32. The U.K.'s FTSE 100 index (http://www.marketwatch.com/story/ftse-100-rises-sharply-from-14-month-low-2018-02-12) rose 1.3% to 7,185.59.

Read:50-year Wall Street veteran says this sure feels like a stock-market bottom (http://www.marketwatch.com/story/50-year-wall-street-veteran-this-sure-feels-like-a-stock-market-bottom-2018-02-06)

And see:Here's how U.S. stocks typically perform in the aftermath of a major rout (http://www.marketwatch.com/story/heres-how-the-stock-market-typically-performs-in-the-aftermath-of-a-major-rout-2018-02-06)

The euro inched up to $1.2264 from $1.2252 late Friday in New York.

Meanwhile, U.S. stock futures were rising Monday (http://www.marketwatch.com/story/us-stock-futures-climb-point-to-rebound-for-monday-2018-02-12), adding to advances seen at the end of last week.

What are strategists saying?

"European markets look set to start the new week firmly on the front foot, a welcome respite after two weeks of sharp falls, helped by the strong rebound in U.S. markets on Friday that saw the Dow and S&P 500 both rebound off their weekly lows," said Michael Hewson, chief market analyst at CMC Markets UK, in a note.

"Even though U.S. markets enjoyed a positive day on Friday, the late rebound can't disguise the fact that U.S., as well as global equities, have undergone their worst [two weeks] this decade," he added.

What is driving the market?

European stocks have slumped this month as part of a wider global market rout. Strategists have pinned the drop in part on the need for a healthy correction after a runup, as well as on rising bond yields amid signs of inflation, with the higher yields luring money out of equities.

See:The Dow's down 10%? It's time for some buying, says longtime bear Doug Kass (http://www.marketwatch.com/story/the-dows-down-10-its-time-for-some-buying-says-longtime-bear-doug-kass-2018-02-09)

Also read:A U.K. rate rise in May? Analysts digest hawkish surprise from BOE (http://www.marketwatch.com/story/a-uk-rate-rise-in-may-analysts-digest-hawkish-surprise-from-boe-2018-02-08)

The Stoxx Europe 600 is down 5.3% so far in February, cutting its gain over the past 12 months to 2%.

Which stocks are in focus?

TDC A/S shares (TDC.KO) jumped 6.3% for the Stoxx Europe 600's biggest gain. The Danish telecom said its board may withdraw its backing for TDC's push to buy Modern Times Group AB's (MTG-B.SK) Nordic entertainment businesses, due to a takeover offer.

That was a shift from last week, when TDC rejected a joint takeover bid from Australia's Macquarie and Danish pension funds, saying it was upbeat on its "stand-alone prospects" as well as the potential MTG deal (http://www.marketwatch.com/story/danish-telecom-tdc-as-rejects-takeover-bid-2018-02-08).

On the downside, Airbus SE's stock (AIR.FR) fell 0.9% after the airplane maker late Friday disclosed new problems with an engine for its A320neo jet (http://www.marketwatch.com/story/airbus-warns-of-new-pratt-whitney-engine-problem-2018-02-12).

"We expect this issue will result in delivery delays for A320neos -- but, we do not know how significant yet," Bernstein analysts said in a note, according to a Dow Jones Newswires report.

Airbus also has signed a contract (http://www.marketwatch.com/story/airbus-emirates-confirm-a380-deal-up-to-36-jets-2018-02-12) with Emirates Airline for 20 A380 jets and an option for 16 more, firming up an earlier memorandum of understanding.

Air France-KLM (AF.FR) shares were roughly unchanged following news that labor unions representing a majority of the airline operator's employees plan to call a strike on Feb. 22 (http://www.marketwatch.com/story/air-frances-labor-unions-call-for-a-strike-afp-2018-02-12).

(END) Dow Jones Newswires

February 12, 2018 05:30 ET (10:30 GMT)

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