Europe: Banks power stocks to record highs after stellar October

[BENGALURU] European stocks finished at record highs on Monday, carrying over momentum from October's gains on the back of strong earnings and as expectations of interest rate hikes supported bank stocks.

The pan-European Stoxx 600 closed up 0.7 per cent at a record high of 478.87 points, boosted by a 1.4 per cent jump in bank stocks, as euro zone bond yields surged on expectations of rate hikes by the European Central Bank (ECB) next year.

The bank sector touched its highest level in more than two years, and was the best performer for the day.

The bank-heavy Italian and Spanish indexes rose 1.2 per cent and 1.4 per cent, respectively, while the German DAX added 0.8 per cent.

"There's a lot of earnings optimism, the feel-good factor of companies bouncing back," said David Madden, markets analyst at Equiti Capital.

"We spent so much time being afraid of the tapering in September and early October. I think people are now going to see tapering as a positive sign, that you can completely come full circle."

The Stoxx 600 in October recorded its best month in seven with a 4.6 per cent rise, driven by a slew of strong earnings. Refinitiv data last week showed that third quarter earnings in the Stoxx 600 are expected to jump 52 per cent from last year.

Investors are now awaiting signals from the US Federal Reserve this week, particularly on when the bank intends to begin tapering pandemic-era stimulus measures.

Among individual stocks, shares in German conglomerate Thyssenkrupp and steelmaker Salzgitter rose 2.4 per cent and 1.9 per cent, respectively, after the US and the European Union ended a dispute over steel and aluminium tariffs.

French drugmaker Sanofi gained 2.2 per cent after HSBC upgraded the stock to "buy".

Volkswagen inched up 0.4 per cent after saying its Skoda Auto would resume production on Sunday following a two-week outage caused by the chip crisis.

Britain's FTSE 100 rose 0.6 per cent. Barclays dipped 1.6 per cent after it said chief executive officer Jes Staley will stand down following regulators' investigations into his ties with convicted sex offender Jeffrey Epstein.

Pandora fell 1.2 per cent after an earnings update from the world's largest jewellery maker showed weak sales growth at its own stores in the third quarter.

Budget airline operator Ryanair rose 1.2 per cent after it reported its first quarterly profit since before Covid-19. But gains in the stock were stifled as the firm downgraded its annual forecast to a loss.

REUTERS