Europe: German stocks rise as cyclicals jump

[BENGALURU] European stocks hit their highest level since early March on Tuesday, cementing a rotation into cyclical sectors that helped German shares outperform.

The pan-European Stoxx 600 rose 1.6 per cent to notch its strongest close since March 6, while a post-holiday catch up saw Germany's main share index jump 3.8 per cent to its highest in nearly three months.

Volkswagen, Daimler and BMW gained between 5.2 per cent and 7.7 per cent on hopes the German government's proposed 5-billion-euro (S$7.84 billion) stimulus package will boost car sales.

Parties in Chancellor Angela Merkel's coalition wrestled on Tuesday over final details of a broader stimulus package to aid the economic recovery from the Covid-19 pandemic.

Europe's automobiles & parts index jumped 3.8 per cent, while insurers, real estate, oil & gas and banking sectors rose between 2.9 per cent and 3.9 per cent.

The growth-sensitive sectors have recovered since mid-May on the back of improving economic data as lockdown restrictions across the world ease, helping the Stoxx 600 index climb nearly 34 per cent from a March trough.

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The European Central Bank is also set to meet on Thursday, with policymakers expected to ramp up bond purchases.

The broad optimism helped investors look past rising US-China trade tensions and the worst civil unrest in the United States in decades.

"There continues to be a push and pull battle raging in stock markets with the technical position winning again in May," wrote Roger Jones, head of equities at London & Capital.

"This created positive returns but the fundamental outlook still looks extremely fragile and uncertain."

Lufthansa shares gained 3.4 per cent as its supervisory board approved a 9-billion- euro government bailout even as it forced the German airline to give some of its prized landing slots to rivals.

France's biggest private TV operator TF1 jumped 6.7 per cent as it announced the launch of a new soccer channel 'Telefoot' along with its partner MediaPro Group.

Norway's Seadrill sank 15.0 per cent after writing down US$1.2 billion on the value of its oil drilling rigs and warning that it may have to convert a part of its US$7.4 billion in debt into equity to survive.

REUTERS