Europe: Stocks cheapest since june to world post late-day rally

[MADRID] European shares reversed losses to post a broad-based rally that lifted all industry groups in the last hours of trading.

The Stoxx Europe 600 Index climbed 0.6 per cent, the most in a week and erasing a slide of as much as 0.3 per cent. The gauge followed US shares higher, after comments by Federal Reserve Chair Janet Yellen bolstered speculation that an interest-rate increase may come as soon as next month.

The region's miners rallied the most as commodities climbed, while bond proxies such as telecom and real estate companies rose, after suffering in recent days amid in rout in government debt.

The European benchmark gauge has alternated between intraday gains and losses for eight straight sessions, the longest streak in two years, after Donald Trump's election created a divergence in performance among industries.

With investors wary before a busy political calendar that includes a referendum in Italy next month and elections in France and Germany next year, the Stoxx 600 trades near its lowest valuation since June relative to a measure tracking global shares.

"European stocks will potentially continue trading in a tight range," said William Hobbs, head of investment strategy at Barclays Plc's wealth-management unit in London.

"The looming Italian referendum, as well as formation of Trump administration and French Republican primaries may well combine to keep investors in more of a 'sentence first, verdict later' frame of mind."

The Stoxx 600 has dropped 2.9 per cent from a four-month high in September. It has lost almost seven per cent this year, heading for its biggest annual slide since the height of the sovereign-debt crisis in 2011, amid concern over the efficacy of central-bank stimulus and political turmoil.

Its valuation of about 14 times earnings estimated in the next year compares with 15 for the MSCI All-Country World Index, data compiled by Bloomberg show.

Among stocks moving on corporate news: Royal Ahold Delhaize NV declined 3.8 per cent as its quarterly profits missed analyst projections.

Royal Mail Plc slid seven per cent after reporting a drop in adjusted operating profit.

Sodexo SA dropped 1.1 per cent after posting revenue that missed estimates.

ABN Amro Group NV lost 2.4 per cent after the Dutch state sold 65 million of its shares.

Zurich Insurance Group AG gained 1.8 per cent after saying it will increase its dividend and cut costs.

Investec advanced 1.7 per cent after posting an increase in earnings.

Hill & Smith Holdings Plc climbed 3.5 per cent after saying it sees annual trading results at the top end of its estimates.

BLOOMBERG