Gains in Miners, Automakers Push Europe Stocks to Two-Month High

Stoxx 600 Europe Index Gains 0.7%
  • Almost all industry groups in the benchmark Stoxx 600 advance
  • Safran, Aryzta tumble after reporting financial results

The optimism that swept through European equities for four weeks took them higher another day, sending the region’s benchmark gauge to a two-month high.

The Stoxx Europe 600 Index rose 0.7 percent -- and as much as 1.1 percent -- with commodity producers and automakers posting some of the biggest advances. Investors are reevaluating European Central Bank stimulus measures while awaiting updates from its peers in Japan and the U.S. Germany’s DAX Index was among the biggest gainers in western Europe, up 1.6 percent as all of its companies rose.

“We’re almost back to where we started the year and we still see equity prices rallying further,” said William Hobbs, head of investment strategy at Barclays Plc’s wealth-management unit in London. “After a muted initial reaction to the ECB action, markets finally decided that they liked the move because it signaled that central banks are not out of ammunition, and that further policy action doesn’t necessarily have to destroy banks.”

European stocks have rebounded almost 14 percent from last month’s low, with commodity producers and banks leading the gains. After a mixed initial response to the ECB’s increased stimulus, the Stoxx 600 jumped on Friday to erase losses from the previous few days and cap its longest weekly rally in a year. Before the rebound, concerns about global growth and the efficiency of central-bank stimulus took stocks down 27 percent from an April record.

Investors are now watching for policy updates from the Federal Reserve and the Bank of Japan coming later this week. Deutsche Bank AG strategists including Sebastian Raedler recommended investors stay cautious on equities because the Fed statement may lead to a sharp re-pricing of tightening expectations, according to a note.

The Stoxx 600 trades at 15 times estimated earnings now, up from the low of 13.2 last month. At its peak last year, the index had a valuation of 16.7.

The region’s miners led gains, with Anglo American Plc up 6 percent. The group has rebounded 41 percent since hitting its lowest level since 2003 in January. Carmakers also rallied on Monday, helped by a weakening euro. Fiat Chrysler Automobiles NV, Renault SA and Peugeot SA rose more than 2 percent.

Among stocks moving on corporate news, Banca Monte dei Paschi di Siena SpA jumped 10 percent, the most in the Stoxx 600, after la Repubblica reported the Italian prime minister is pressing other lenders to consider a takeover of the country’s third-largest bank. Home Retail Group Plc gained 1.2 percent on reports J Sainsbury Plc is considering to raise its offer for the owner of Argos stores. Sainsbury climbed 1.4 percent.

Safran SA slumped 6.3 percent after the aircraft-engine manufacturer forecast that its profit margin will be little changed until 2020. Aryzta AG was the biggest loser in the Stoxx 600, plunging 12 percent after the Swiss maker of bread dough said revenue missed its own forecasts and growth will be erratic over the next 18 months.

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