Europe: Shares rally on improving data, insurers jump

[BENGALURU] European shares rallied on Wednesday, with insurers jumping after France's AXA said it would pay a dividend, while improving global data spurred bets of faster economic recovery from the coronavirus crisis.

The pan-European Stoxx 600 rose 2.5 per cent to close at its highest since March 6, with Germany's DAX outpacing the rest of Europe with a 3.9 per cent gain.

The German index recorded its strongest close since Feb 27, and is just 9.5 per cent below its all-time high.

European markets have performed strongly so far this week as several countries eased strict lockdown measures, while hopes of more stimulus and encouraging developments on a potential Covid-19 treatment have helped the Stoxx 6000 recover more than 37 per cent from March lows.

"When (the slump) happened, there was not a fundamental issue in the economy. It was all down to a single event and there's no reason why we can't come back very strongly," said Randeep Somel, associate portfolio manager at M&G Investments.

China's services sector returned to growth in May, a survey showed, while data from the euro zone suggested the worst of the pandemic's economic impact was over.

The European Central Bank meets on Thursday and is expected to increase its bond purchases by 500 billion euros.

"While economists broadly agree the ECB will meet market expectations, it would not be out of the realm of possibility... to delay the increase - given that its current program is far from depleted," Cantor Fitzgerald analysts wrote in a note.

Insurers, automakers, banks and travel & leisure stocks led the gains, up between 3.8 per cent and 6.8 per cent, as investors found value in beaten-up cyclical sectors.

AXA jumped 10.4 per cent after saying it would pay a 2019 dividend to shareholders and shares in Allianz, Prudential and Generali also rose between 7.8 per cent and 8.5 pe cent.

Renault SA surged 10.5 per cent after it finalised a 5 billion euro (S$7.83 billion) loan from the French government and Goldman Sachs upgraded its stock to "buy".

Shares in Infineon technologies, AMS and ASM International rose between 3.8 per cent and 7.3 per cent after US chipmaker Microchip raised its earnings forecast.

Lufthansa gained 7.7 per cent as it vowed to step up restructuring measures after posting a first-quarter net loss of 2.1 billion euros (S$3.3 billion).

REUTERS