European Stocks Close at 3-Month High on Rebounding Cyclicals

(Bloomberg) -- European stocks rose for a third day as a rotation into cyclicals gathered pace ahead of a key central bank meeting tomorrow.

The Stoxx Europe 600 Index advanced 2.5% at the close, with optimism about reopening economies and stimulus bets further supported by euro-area output data that was less severe than initially estimated. The benchmark closed at its highest level since March 5, led by insurers, autos and banks.

A rebound in European equities has regained momentum this week despite growing U.S.-China tensions, with the Stoxx 600 outperforming the S&P 500 Index since mid-May. Investors expect more stimulus measures from the European Central Bank meeting tomorrow.

“The pain trade is higher as many missed the rally thus far, and there is still a lot of cash on the sidelines,” Frederik Hildner, portfolio manager Salm-Salm & Partner, said by phone.

Germany’s cyclical-heavy DAX Index jumped 3.9%, rising above its 200-day moving average for the first time since August 2019. The gauge closed at its highest level since Feb. 26.

Among notable movers, Renault SA rallied 10% after finalizing a state-backed loan, while AXA SA jumped after cutting rather than postponing its dividend.

“Europe is due a catchup,” Barclays strategists including Emmanuel Cau wrote in a note on Wednesday, while cautioning that the time of easy gains may be over. They say the rotation into European equities, as well as value and cyclical laggards, could be helped by rising PMIs, stabilizing bond yields and a weaker dollar.

©2020 Bloomberg L.P.

This article was automatically imported from our old content management system. If you see any display errors, please let us know:

Share this story