Best session in 11 weeks for European stocks as banks explode

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The DAX chart of the German stock index is pictured on the stock exchange in Frankfurt, Germany on September 29, 2021. REUTERS / Staff

  • Banks jump on rate expectations
  • Eurozone business growth slowed in September – PMI
  • Infineon on optimistic forecasts

October 5 (Reuters) – A 3.5% jump in European banks and a rally in struggling tech companies pushed the European stock index up more than 1% on Tuesday, also helped by positive US data that bolsters Wall Street.

The European tech sector (.SX8P) jumped 2.2%, shattering a seven-game losing streak in which it fell 11.7%. US peers also rallied as investors turned to growth stocks.

Chipmaker Infineon’s 4.8% rise (IFXGn.DE) led to gains after confirming its 2021 revenue and saying it expects results to rise further next year. Read more

The pan-European STOXX 600 Index (.STOXX) finished up 1.2% with all major sectors in the dark, helping it record its best session since July 21.

Bank stocks (.SX7P) hit a high of more than a year and a half. JPMorgan (JPM.N) said it is still “overweight” on European banks citing the rising return on capital and rate outlook.

Spanish BBVA (BBVA.MC), Italian Intesa Sanpaolo (ISP.MI) and Finnish Nordea Bank (NDAFI.HE) were JPM’s top picks. Shares of Italy’s Unicredit (CRDI.MI) jumped 4.3% after the bank confirmed its third-quarter forecast to analysts.

“Rate-sensitive bank stocks are getting a boost as investors begin to seriously factor in rate hikes,” said Danni Hewson, financial analyst at AJ Bell.

“But there are big questions about how the economy is really rebounding, and cost pressures are wreaking havoc on businesses and consumers,” Hewson said.

Business growth in the euro area slowed in September as supply issues limited activity, while high inflationary pressures weighed on demand, according to the IHS Markit survey. Read more

“PMIs are consistent with the slowing economic recovery in the euro area … Surveys also show that price pressures are spreading to the service sector, even in parts of the periphery,” said Jessica Hinds , economist Europe at Capital Economics.

Investors are now awaiting US employment data on Friday for signs of the Federal Reserve’s declining asset purchase schedule. Data on Tuesday showed that activity in the US service sector increased in September. Read more

British bakery and fast food chain Greggs (GRG.L) climbed 11.1% to surpass the STOXX 600 after raising its profit outlook for the year despite staff and supply chain issues. Read more

Third-quarter profits of companies listed on the STOXX 600 are expected to rise 45.6% from a year ago, according to data from Refinitiv.

German leasing company Grenke (GLJn.DE) fell 6.7% after narrowing its forecast range for the full year, while audio solutions provider GN Store Nord (GN.CO ) fell 7% after a reduction in forecasts at the company’s Hearing unit due to delays in product launches.

Dutch tech investor Prosus (PRX.AS) rose 2.6% after obtaining regulatory approval to increase its stake in German food delivery company Delivery Hero (DHER.DE).

Reporting by Sruthi Shankar and Anisha Sircar in Bengaluru; Editing by Sriraj Kalluvila, Ramakrishnan M. and Bill Berkrot

Our Standards: The Thomson Reuters Trust Principles.


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