Rally in Banks Pushes European Stocks Into Bull-Market Territory

Stoxx 600 Rises Led by Italian Shares

A third day of gains propeled European stocks into a bull market as data from the U.S. to China signaled a strengthening global economy.

The Stoxx Europe 600 Index advanced 0.7 percent at the close, taking its gains from a February low to 20 percent. The gains met the definition of a bull market a little less than a year after the benchmark entered bear territory. A better-than-forecast report on U.S. manufacturing followed data in China that showed its factories and services both ended 2016 on relatively robust notes.

Banks led the rally in Europe, up the most in almost a month, while other cyclical shares such as miners and carmakers also advanced. In an extension of the sector rotation seen in the last quarter of 2016, defensive shares including utilities and real estate firms declined.

  • Stoxx 600 lenders completed a third day of gains, with Credit Suisse Group AG jumping 6.4 percent after Bank of America Corp. listed it among its top buy ideas for the first quarter.
  • “There’s lot of fresh money and a strong consensus saying that financials are good place to be, due to inflation expectations and higher rates,” said Peter Garnry, head of equity strategy at Saxo Bank A/S, said by phone from in Hellerup, Denmark. “We’re also bound to get a repricing of the very weakest financial institutions.”
  • For Alain Bokobza, head of global asset-allocation strategy at Societe Generale SA, the switch from monetary to fiscal-policy impetus in developed countries is a strong incentive to rotate out of bonds into equities this year. “By end-2017, we expect two Federal Reserve rate hikes and an early start to ECB tapering, putting an end to the bond party that started in the early 1980s,” the strategist wrote in a note, referring to the European Central Bank.
  • A rebound in earnings should also help European stocks this year, helped by faster inflation, Barclays equity strategist Dennis Jose wrote in note. It should offset risks related to elections in a number of countries, Jose wrote.
  • The U.K.’s FTSE 100 Index, trading for the first time in 2017, rose 0.5 percent to close at a fresh record.
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