(Bloomberg) -- European stocks climbed to the highest level in five weeks, posting their best weekly gain since March, as early earnings reports boosted investor confidence that the recovery can continue.
The Stoxx 600 Europe Index added 0.7% by the close in London, bringing this week’s advance to 2.7% and led by travel, banking and retail sectors. European banking shares closed at the highest level since February 2020, within 0.1% of erasing their pandemic losses, as the sector is seen as an inflation hedge and benefits from higher rates.
Energy Crisis Fuels U.K.’s FTSE 100 Index Rally to Pandemic High
Equities in the region are rebounding in October as concerns about various risks, including China’s real estate sector and inflation, ease. Investors, flush with cash and struggling to find alternatives to stocks, are now turning their focus to what’s expected to be a strong earnings season, despite rising energy prices and supply constraints.
“It’s been a positive week with risks on some of the main fronts such as China or inflation being reduced,” said Diego Fernandez, chief investment officer at A&G Banca Privada in Madrid. “Covid is now over for markets and even if we are in an advanced stage of the cycle, there is still money to be made.”
The main European benchmark is down about 1.4% from its August record high but has now posted two consecutive weekly gains for the first time in two months. The Stoxx 600 is up 18% this year.
The U.K.’s FTSE 100 Index climbed to the highest level since February 2020, buoyed by oil and banking shares.
“We think the recent relative weakness in European stocks is only justified if one expects a sharper global economic downturn. However, we see no indication for that yet and expect slower but still strong growth compared to history for the near term,” said Max Anderl, a portfolio manager at UBS Asset Management in London.
Mediclinic Jumps, Temenos Dips on Sales Miss: EMEA Equity Movers
Among individual stocks, Temenos AG fell 14% after quarterly earnings that analysts said were a “mixed bag.” Deutsche Lufthansa AG jumped 4.6% after analyst upgrades at Stifel and Deutsche Bank. Airlines also gained after the White House said the U.S. will open its borders to vaccinated foreigners on Nov. 8. HSBC Holdings Plc gained after Bank of America upgraded the stock to buy from neutral on sensitivity to rising rates.
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