European stocks rebound as higher chance of US stimulus offsets gloom over explosion in COVID-19 cases

• European stocks recovered on Friday despite an alarming rise in cases of Covid-19 across the region, driven by optimism that US lawmakers could reach agreement on fiscal stimulus.
• The UK's FTSE 100 rose 0.6%, Germany's DAX rose 0.5%, and the Euro Stoxx 50 added 0.7% in early trading.
• UK Prime Minister Boris Johnson is expected to provide an update later Friday on Brexit negotiations. The British Foreign Secretary has signaled that the country is close to a deal with the EU.
• "The increasingly higher risks of COVID-19, US fiscal stimulus impasse, and the impending US elections, saw a risk-aversion theme sweep currency markets overnight," a senior market analyst at OANDA said.

European stocks rebounded on Friday, driven by investor optimism that the US economy could soon see another wave of economic lifelines, which offset a steep rise in cases of COVID-19 across the region.

London's benchmark FTSE 100 rose 0.6% ahead of an expected update from Prime Minister Boris Johnson's government that Brexit negotiations will extend beyond Thursday's "deadline."

British Foreign Secretary Dominic Raab said on Friday that the European Union and the UK "are close" on a Brexit deal.

The Euro Stoxx 50 rose 0.7% and Germany's DAX gained 0.5%, recovering the previous day's losses hurt by a steep rise in cases across Europe.

Daily cases in the UK have risen steadily since August, leading to stricter restrictions beginning Friday night. "In London, infection rates are on a steep upward path, with the number of cases doubling every ten days," UK Health Secretary Matt Hancock said in parliament.

Cases are also surging in Belgium, Poland, Germany, Ireland, Italy, and Sweden.

Meanwhile, US President Donald Trump and Senate Majority Leader Mitch McConnell are at odds over a coronavirus relief bill. Trump has been stepping up calls for a larger spending bill of $1.8 trillion, which has given financial markets traders cause for some optimism. But McConnell's limits are set at $500 billion.

US futures edged higher on Friday. Futures on the Dow Jones, S&P 500, and the Nasdaq rose about 0.3% as of 6:30 a.m. ET.

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However, the Republicans and Democrats are expected to eventually reach a deal.

Kristalina Georgieva, the managing director of the International Monetary Fund, told CNBC that she firmly believes the US will execute new stimulus, helping to cut down on current uncertainties globally.

"The increasingly higher risks of COVID-19, US fiscal stimulus impasse, and the impending US elections, saw a risk-aversion theme sweep currency markets overnight," said Jeffrey Halley, a senior market analyst at OANDA.

A higher-than-expected fall in US crude inventories set off a decline in oil prices, "with COVID-19 and US fiscal and election risks clouding the consumption picture after soft US jobs data," Halley said.

Brent crude fell 1.6%, to $42, and US West Texas Intermediate fell 1.3%, to $40.

New US weekly jobless claims rose to an unadjusted 898,000 for the week that ended on Saturday, above the median economist estimate of 825,000 compiled by Bloomberg.

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