Third Week of Advances Pushes European Stocks to a 1-Month High

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European Stocks Head for Third Week of Gains

European shares closed at a one-month high, capping their longest streak of weekly gains since July.

The Stoxx Europe 600 Index rose 0.2 percent at the close, taking its advance for the week to 0.9 percent. The number of its shares changing hands was about 40 percent lower than the 30-day average, with U.S. markets closing early following yesterday’s Thanksgiving holiday. Actelion Ltd. led a rally in health-care shares, surging 18 percent after confirming that Johnson & Johnson has approached the Swiss drugmaker about a potential takeover.

European shares have rebounded 4.2 percent from a low on Nov. 4 on bets that Donald Trump’s administration will lead to increased infrastructure spending. A related rally in copper prices pushed European miners to their highest prices since June 2015 on Thursday. While the Stoxx 600 has been trading in a tight range, its longer-term average level is getting close to crossing above its shorter-term mean.

“European equities are a prime target as we see U.S. stocks as being expensive, and with dollar strength they can use their expensive paper and higher dollar to buy European assets,” said Gerard Lane, chief investment officer of Artorius Wealth in London. His firm oversees 300 million pounds ($374 million). “How long it continues given rising bond yields and increasing cost of finance may be an issue.”

While U.S. equity benchmarks reached record levels this week, the Stoxx 600 is still below levels seen before the Brexit referendum. Its valuation of 14.3 times estimated earnings hit its lowest since July 2012 relative to the S&P 500 Index this week.

On Friday, companies deemed more immune to the economic cycle led gains, while those seen benefiting from stronger growth -- such as miners and banks -- declined. That’s a reversal of industry moves seen in the aftermath of Trump’s win.

Consumer stocks Lindt & Spruengli AG and Nestle SA gained more than 1.8 percent, sending the Swiss Market Index up 1.1 percent, one of the biggest advances among western-European markets.

“We are seeing a tentative rotation back to something a bit more defensive today,” said Michael Ingram, a market strategist at BGC Partners in London. “The Trump reflation trade is running out of steam.”

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