Europe: Bank stocks bounce off record low, helping Europe recover some lost ground

[BENGALURU] European stocks bounced back sharply on Monday as investors snapped up beaten-down shares in the banking sector that hit a record low last week and data gave signs of pick-up in the Chinese economy.

The pan-European STOXX 600 index jumped 2.2 per cent, recording its biggest percentage gain since mid-June, after last week's 3.6 per cent drop.

The broader banks index surged 5.6 per cent in its first session of gain in eight days.

HSBC surged 8.9 per cent after Chinese insurance group Ping An, the biggest shareholder in the British bank, boosted its stake to eight per cent from 7.95 per cent.

Commerzbank rose 5.6 per cent after it named a top manager at rival Deutsche Bank, Manfred Knof, to lead the bank. The stock move was, however, in line with the broader sector.

Investors have shunned Europe's banking sector hit by a cocktail of lower global borrowing costs, rising bad loans due to the economic downturn and a dirty money scandal that made it the worst performer this year with a 42 per cent decline.

"There's a chance for tactical rebalancing, but not a structural rally in banks," said Dhaval Joshi, European investment strategist at BCA Research.

Investors have been wary about a second wave of coronavirus infections hampering business activity in Europe, while uncertainty about more US fiscal stimulus and a Brexit trade deal have all sparked bouts of volatility in financial markets this month.

"With each of these issues remaining 'live' in the near term, we expect markets to remain choppy for a bit longer," Morgan Stanley's equity strategist Graham Secker wrote in a note.

However, the worst weekly selloff in three months drove bargain hunters to step in, while data showed profits at China's industrial firms grew for the fourth straight month in August helped the trade-sensitive German index outperform.

Europe's auto and industrial sectors, heavily reliant on Chinese demand, rose more than 3.5 per cent.

ArcelorMittal gained 4.8 per cent after Cleveland-Cliffs Inc agreed to buy the US assets of the steelmaker for about $1.4 billion.

Sonova, the world's biggest hearing aid maker, surged 14.4 per cent as it expects revenue to return to growth in the next six months.

London-based spirits maker Diageo rose 6.1 per cent after saying it had made a strong start to its fiscal year 2021, with its US business performing ahead of expectations.

REUTERS