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[LONDON] European stocks advanced after posting the biggest weekly drop since November as investor concerns over a standoff between the US and North Korea eased.
The Stoxx Europe 600 Index rose 1.1 per cent at the close. All 19 industry groups advanced, with utilities and real estate stocks leading the gains. The Stoxx 600 on Friday extended its drop from a May peak to 6.1 per cent as US President Donald Trump warned the isolated nation not to follow through with a missile test near Guam, after warning of unleashing "fire and fury" on North Korea earlier in the week.
Strategists at HSBC Holdings Plc say the probability of a so-called correction for European equities in the second half of the year is rising. The MSCI Europe Index hasn't had a drop exceeding 10 per cent from peak to trough in more than 13 months, the second-longest stretch since the global bull market kicked off in March 2009.
Central Intelligence Agency director Mike Pompeo and national security adviser H R McMaster, in Sunday talk show appearances, said there's no indication war will break out between the US and North Korea. "The fact that we didn't see an escalation in the rhetoric from either side over the weekend could be enough to trigger a recovery after last week's risk selloff, and keep the markets focused on the economic fundamentals," Kathleen Brooks, research director at City Index, wrote in a note.
The risk-reward for equities remains unattractive, JPMorgan equity strategists including Mislav Matejka and Emmanuel Cau wrote in a note, as earnings momentum is deteriorating and valuations are expensive.
Among shares active on corporate news, RWE AG rose 2 per cent to close at the highest level since June after the utility said full-year profit will be at the upper end of its forecast range as profitability improves at its gas generation business.