Photographer: Alessandro Della Bella/Bloomberg

Banks' Surge Takes Europe's Stock Rally Into 2nd Day; HSBC Rises

  • All industry groups up more than 2%; U.S. closed for holiday
  • Automakers surge, and miners are on the verge of a bull market

The optimism that swept through European equities entered a second day as lenders and carmakers climbed further, while investors bet on additional central-bank stimulus.

The Stoxx Europe 600 Index rose 3 percent, taking its two-day gain to 6 percent. Italian and Greek lenders led a bank rally, while the region’s automakers advanced the most since August, helped by a weakening euro. Miners are close to a 20 percent rebound from their January low.

European equities are benefiting from a relief rally after reaching their lowest prices since 2013, while speculation for further stimulus is also boosting sentiment. President Mario Draghi said the European Central Bank will act if market turmoil threatens the region’s recovery, and People’s Bank of China Governor Zhou Xiaochuan voiced support for the yuan. Even as data showed a slide in Chinese exports in January and an even bigger tumble in imports, the Shanghai Composite Index fell just 0.6 percent after reopening following a week-long holiday.

“It’s a catch-up for the European sector that had been crushed since the start of the year,” said John Plassard, senior equity-sales trader at Mirabaud Securities LLP in Geneva. “The Chinese market didn’t react as bad as we feared, and with the weak export data there is some big hope that he central banks will react quite fast.”

Standard & Poor’s 500 Index futures expiring in March also rose, up 1.4 percent. U.S. markets were closed for a holiday on Monday.

European equities rallied the most in three weeks on Friday, after hitting their lowest prices since 2013, as banks, miners and energy producers surged at least 5.5 percent. Lenders have been particularly hit in the rout that took $8.4 trillion from global equities this year and the Stoxx 600 down as much as 17 percent. The index closed at a valuation of about 14 times estimated earnings, down from 17 in April.

As concern grew over the efficacy of central-bank stimulus amid economic data that started missing forecasts, a gauge tracking volatility expectations for European equities reached the highest level since August last week. Still, strategists are largely bullish. They’re projecting a Stoxx 600 rebound of 19 percent through the end of the year.

Benchmark stock indexes of Italy, Spain, Greece and Germany rallied more than 2.5 percent on Monday. Those all lost more than 16 percent this year through Friday, becoming some of the world’s worst performers among 93 equity indexes tracked by Bloomberg.

Greece’s Eurobank Ergasias SA, Piraeus Bank SA and National Bank of Greece SA surged more than 26 percent, while Italy’s Banca Monte dei Paschi di Siena SpA rallied 9.2 percent after hitting record lows last week. Danske Bank, which this year surpassed Deutsche Bank AG in market value, advanced 6.3 percent after renewing a pledge to retail clients that they won’t foot the bill for Denmark’s negative interest rates. Credit Suisse Group AG, which also tumbled to the lowest ever, rebounded another 2.7 percent, while HSBC Holdings Plc rose 1.4 percent as it said it will keep its headquarters in the U.K. after considering a relocation to Hong Kong.

Reckitt Benckiser Group Plc gained 6.8 percent after reporting quarterly sales growth that beat analyst estimates as retailers stocked up on cold and flu remedies. Hennes & Mauritz AB added 3.5 percent after reporting a rise in January sales.

E.ON SE and RWE AG gained more than 4.4 percent after people familiar with the matter said Germany is willing to have taxpayers share some of the expenses for disposing of nuclear waste. Engie SA rose 3.1 percent after a report that its incoming chief is planning as much as 20 billion euros ($22 billion) of disposals. LafargeHolcim Ltd. added 4.6 percent after after saying it’s getting strong interest for assets it’s forced to sell in India.

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