- Banks, energy and mining shares lead Stoxx 600 advance
- Marks & Spencer slides as turnaround plan will hurt profits
European equities posted their biggest back-to-back advance since February as optimism grew the U.S. economy is strong enough to withstand higher interest rates.
The Stoxx Europe 600 Index added 1.3 percent at the close of trading. Banks posted the biggest gains among industry groups, followed by energy shares and miners as commodities rose. Europe’s benchmark jumped yesterday after better-than-forecast U.S. housing data signaled economic strength before a potential Federal Reserve rate hike next month.
“U.S. data is supporting the view that if we don’t see stellar growth, at least we don’t see a recession, and that’s a good thing,” said Michael Woischneck, who oversees about 300 million euros at Lampe Asset Management in Dusseldorf, Germany. “If the Fed has the chance to hike again then it should take this opportunity as the market is very prepared.”
A rally in European shares is picking up pace after stalling since reaching a three-month high on April 20. The Stoxx 600 climbed as much as 16 percent from a February low before losing steam amid concern about slowing global growth, Fed policy tightening and mixed earnings reports.
The Stoxx 600 closed above its 50-day moving average on Tuesday for the first time since slipping below it earlier this month. That sends a short-term bullish signal in technical analysis, according to Saxo Bank A/S trader Pierre Martin.
Traders are pricing in a 36 percent chance of higher borrowing costs in June after Fed officials indicated willingness to act if the economy shows sustained improvement. That’s up from 4 percent last Monday. July is now the first month with more than even odds for a rate rise. Fed Chair Janet Yellen is scheduled to speak on Friday after European markets close.
A gauge of lenders posted the best two-day rise in six weeks, led by those in Spain and Italy. Banco Popular Espanol SA and UBI Banca SpA gained more than 7 percent.
Among shares active on corporate news, Novo Nordisk A/S gained 3.5 percent after its once-a-day combination drug for diabetes won unanimous backing from a group of advisers to the U.S. Food and Drug Administration. Marks & Spencer Group Plc tumbled 10 percent after saying profits will be hurt by investments in a turnaround plan.