European stocks extended their biggest rally since 2011, with benchmark gauges of Portugal and Italy surging more than 10 percent in four days, as Greece and its creditors reached an agreement paving the way for a new bailout.
The Stoxx Europe 600 Index rose 2 percent to 396.46 at the close of trading in London, taking its four-day increase to 6.4 percent. Portugal’s PSI 20 Index advanced 1.8 percent, and Italy’s FTSE MIB Index climbed 1 percent. Spain’s IBEX 35 Index added 1.7 percent, sending its four-day jump to 8.5 percent.
“We got an agreement and it’s going to help sentiment enormously and we’ll be back to looking at the economic position and the earnings of individual companies,” said Patrick Spencer, equities vice chairman at Robert W. Baird & Co. in London. “European markets will continue to recover now that we have this uncertainty behind us.”
After almost 17 hours of talks in Brussels, Greece and European leaders agreed on reforms needed to start formal negotiations over a third bailout program. Prime Minister Alexis Tsipras surrendered to European demands for immediate action to qualify for up to 86 billion euros ($95 billion) of aid his country needs to stay in the euro. Euro Stoxx 50 Index futures opened lower and erased a loss of as much as 1.2 percent amid reports that an accord had been reached.
A U.S.-listed exchange-traded fund tracking Greek equities fell 3.4 percent after earlier gaining as much as 5.3 percent in New York. American depositary receipts of National Bank of Greece SA dropped 2.5 percent, reversing a 12 percent jump.
Debt talks have been dictating stock moves, with equities alternating between gains and losses almost every week since April. The benchmark gauge of European equities, which rose as much as 21 percent this year to a record, dropped almost 10 percent since then through July 7 as negotiations between Greece and its creditors dragged on.
Benchmark gauges of Italy and Portugal were some of those hit the hardest during the selloff that sent European equities to an almost five-month low. The Stoxx 600 then recovered, ending up 1.4 percent last week on optimism that Greece would get a bailout. France’s CAC 40 Index was among the biggest gainers in western-European markets on Monday, up 1.9 percent. It’s rallied 8.5 percent in four days.
All Stoxx 600 industry groups advanced, with banks contributing the most to the gains. Miners rose 3.1 percent as the Bloomberg Commodity Index climbed for a fourth day.
Alent Plc surged 44 percent after Platform Specialty Products Corp. agreed to buy the U.K. chemical maker. Sanofi climbed 2.8 percent after Deutsche Bank AG recommended buying the stock, citing its drug pipeline. IAG SA added 3.4 percent after UBS Group AG raised its rating to buy from neutral.
DKSH Holding AG lost 2.3 percent after putting its Maurice Lacroix watch brand up for sale. International Personal Finance Plc slumped 25 percent, the most since May 2009, after saying a draft Polish law that would cap all non-interest costs may have an adverse financial effect on the company.
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