Miners Surge Sends Europe Stocks to 3-Week High; FTSE 100 Gains

  • Commodity producers reached their highest level since Dec. 3
  • U.K. equities rise as pound weakens amid `Brexit' debate

The One Question Brits Are Asking: In or Out?

Commodity producers jumped to their highest levels since the start of December, pushing European stocks to a three-week peak.

The Stoxx Europe 600 Index advanced 1.7 percent, with Glencore Plc, BHP Billiton Ltd. and Rio Tinto Group up more than 8 percent. In the U.K., where the debate over whether to leave or stay in the European Union is in full steam, the FTSE 100 Index climbed 1.5 percent. In addition to the rebound in miners, the gauge is benefiting from a tumble in the pound after the mayor of London said he’ll campaign for an exit.

“While we still have some pretty big risks out there, the market has sold off so much it was about time we got a bounce back,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “We’ve seen a turnaround in the commodities sector. Some of the drag from China is also starting to ease. We have a bit further to go in this relief rally.”

Commodity producers have rebounded 35 percent from their low in January and are now the only industry group up for the year. Last week, they entered a bull market and helped the Stoxx 600 rally the most in a year. The benchmark gauge has regained 9.3 percent since its Feb. 11 low, taking its valuation to 14.4 times estimated earnings from a low of 13.2. It climbed to almost 17 at its peak last year.

In the U.K., the FTSE 100 rose for the first time in three days. The gauge is the best performer among European peers this year, helped by the rebound in miners and a weakening pound.

Prime Minister David Cameron last week negotiated new terms for Britain’s membership in the EU, and a referendum will be held on June 23, where voters will chose whether to exit or stay in the 28-nation bloc. Both London Mayor Boris Johnson and Justice Secretary Michael Gove said they’ll campaign for the country to leave.

While JPMorgan Chase & Co. said an exit would be “quite negative” for the market, it doesn’t expect it to happen. The bank just turned overweight British equities after being underweight for three years, citing attractive valuations and a lower commodity exposure.

Among stocks moving on corporate news, Associated British Foods Plc added 1.2 percent after the owner of discount-clothing retailer Primark and Kingsmill bread raised its annual profit outlook. Umicore SA rallied 7.2 percent after UBS Group AG recommended buying shares of the maker of catalysts. Home Retail Group Plc jumped 13 percent after Steinhoff International Holdings Ltd. offered 1.4 billion-pounds ($2 billion) to buy it, countering a bid by J Sainsbury Plc. Sainsbury dropped 2.3 percent.

Air France-KLM Group fell 5.7 percent amid a strike of runway employees at the Charles de Gaulle Roissy airport, which the company said wasn’t affecting traffic. Homebuilder Taylor Wimpey Plc and British Land Company Plc, a real estate investment trust, fell more than 3 percent. HSBC Holdings Plc declined as much as 5.4 percent before closing 0.9 percent lower after posting a quarterly loss, hurt by a slide in income from lending, higher loan-impairment charges and fair-value losses on its debt.

Banks in Europe have been particularly hit this year, falling 21 percent as a group, on concern about bad loans, creditworthiness and the impact of low interest rates on profits. Deutsche Bank AG, Credit Suisse Group AG and Italy’s Banca Monte dei Paschi di Siena SpA are among those that dropped to records this month.

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