Europe: Shares end near 3-week high as auto, travel sectors rally

[BENGALURU] European stocks hit a near three-week high on Tuesday, as US stimulus bets and encouraging data out of China and Germany galvanised growth-linked cyclical sectors like travel and leisure, banking and automakers.

The pan-European Stoxx 600 index closed 1.7 per cent higher, with Wall Street's S&P 500 coming in close quarters with an all-time high as investors hoped for more US fiscal stimulus.

Carmakers surged 4.4 per cent in Europe after data showed China's auto sales climbed 16.4 per cent in July, the fourth straight month of gains as the world's biggest vehicle market comes off lows hit during the coronavirus lockdown.

Other hard-hit sectors like travel & leisure, oil & gas and banks jumped between 3.7 per cent and 4.5 per cent.

Unprecedented monetary and fiscal stimulus, hopes of a Covid-19 vaccine and Europe's relative success in limiting the spread of coronavirus have helped the Stoxx 600 climb 38 per cent from its March lows, but remains about 15 per cent below its record highs.

"There has been a decent tick-up in economic growth momentum, and earnings for some of the cyclical sectors have come in better than expected," said Paul Danis, chief global strategist at wealth manager Brewin Dolphin.

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"There is a good reason to believe that some of the beaten-down value names could pick up. But it does make sense to have bias for the mega-cap growth names."

A ZEW survey showed investor sentiment in Germany picked up more-than-expected in August, reflecting hopes that Europe's biggest economy is on the road to recovery.

The upbeat global mood helped investors look past data showing the number of people in work in Britain suffered the biggest drop since 2009 in the three months through June.

Holiday Inn-owner InterContinental Hotels gained 4.8 per cent as it saw some "very early" signs of a recovery in demand, but its profit slumped 82 per cent in the first half of 2020.

German online fashion retailer Zalando SE rose 1.9 per cent after reporting a more than doubling of sales on its site.

Of the 240 companies in the Stoxx 600 that have reported second-quarter earnings so far, 60.4 per cent topped analysts' estimates, according to Refinitiv Eikon data. In a typical quarter, half beat estimates.

Banco BPM surged 6.9 per cent on expectations that Italy's third-largest bank could become involved in a possible merger.

Defensive sectors like real estate, utilities, healthcare and food & beverage - considered more stable during an economic crisis - posted smaller gains.

REUTERS