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European Markets Close Sharply Higher On Optimism About Vaccine, Stimulus

European markets ended higher on Monday, with investors picking up stocks, reacting positively to news about Italy, New York and Spain moving to ease quarantine restrictions and reopening more businesses.

Markets also benefited from higher crude oil prices and comments from Federal Reserve Chairman Jerome Powell that the economic downturn could last another year and a half, but this will not be another Great Depression.

"It's going to be a very sharp downturn," Powell said on CBS' "Face the Nation" that aired on Sunday. He said the U.S. would have a slow recovery from what he called "biggest shock" that the economy's had in living memory.

However, he added, "It should be a much shorter downturn than you would associate with the 1930s."

Traders were also betting on hopes of more stimulus from governments and central banks, and optimism about a potential coronavirus vaccine sometime soon after biotech firm Moderna said its experimental vaccine had produced antibodies in all 45 trial participants.

German Chancellor Angela Merkel and French President Emmanuel Macron have reportedly agreed on a huge European Recovery Fund that would offer grants to regions and sectors mostly affected by the coronavirus pandemic.

The pan European Stoxx 600 climbed up 4.07%. The U.K.'s FTSE 100 ended 4.29% up, Germany's DAX surged up 5.67% and France's CAC 40 jumped 5.16%, while Switzerland's SMI advanced 2.72%.

Among other markets in Europe, Austria, Belgium, Finland, Ireland, Netherlands, Poland, Portugal, Russia, Spain and Sweden moved up 3 to 6%.

Czech Republic, Denmark, Greece, Iceland, Norway and Turkey gained 1.2 to 3%.

In the U.K. market, Carnival and TUI both gained nearly 13.5%. Anglo American surged up more than 11% and IAG ended higher by about 10.3%.

EasyJet, Fresnillo, Centrica, Intercontinental, Whitbread, Rolls-Royce Holdings, BHP Group, Rio Tinto, BP, Royal Dutch Shell, M&G, Glencore, CRH, Melrose and Barclays gained 7 to 10%.

In the German market, Thyssenkrupp soared 12.5%. Daimler surged up 10.7%, while Wirecard, Lufthansa, Deutsche Bank, Volkswagen, BMW, Adidas, Continental and Infineon Technologies gained 7 to 10%.

BASF, Fresenius, Allianz, Deutsche Post, Covestro, HeidelbergCement, Merck and RWE also posted strong gains.

In France, Airbus Group, Unibail Rodamco, Technip, Valeo, Societe Generale, Saint Gobain, Vinci, Safran, BNP Paribas, Bouygues, ArcelorMittal, Credit Agricole and Michelin gained 6 to 12.5%.

In economic news, the euro area economy will not return to pre-pandemic level until 2021, European Central Bank Executive Board Philip Lane said in an interview with El País.

The future depends much on how quickly the restrictions on economic activity can be eased and also how people adapt to living with the coronavirus.

"From today's perspective, it looks in any case unlikely that economic activity will return to its pre-crisis level before 2021, if not later," Lane said.

The banker said the ECB is continuously monitoring the situation and are ready to adjust all instruments if necessary.

In its monthly report released today, Germany's Bundesbank said the German economy is set to see a significant fall in the second quarter despite easing of coronavirus containment measures.

"Despite the easing measures that have been introduced, social and economic life in Germany is still far from what was previously considered normal," the bank said.

The largest euro area economy had entered a technical recession in the first quarter with the GDP contracting 2.2%, the biggest since the global financial crisis in 2008-09.

Bundesbank said the prospects for the labor market for the coming months are also poor.

According to a survey from IHS Markit, UK household finances remained under severe pressure in May. The Household Finance Index, which measures households' overall perceptions of financial well-being, came in at 37.8 in May, up only slightly from April's eight-and-a-half year low of 34.9.

UK household finances remained under severe pressure in May, survey data from IHS Markit showed Monday.

The Household Finance Index, which measures households' overall perceptions of financial well-being, came in at 37.8 in May, up only slightly from April's eight-and-a-half year low of 34.9.

Although the index rose from April, the figure remained indicative of a strong degree of pessimism towards the outlook for financial health.

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