European stocks jumped yesterday, mirroring gains in Asia, as investors welcomed Greece’s debt relief deal, bright German data, easing Brexit concerns and firmer oil prices.
The region’s markets had also climbed the previous day as opinion polls suggested Britain would vote to remain in the European Union in a crucial referendum next month.
Sentiment was boosted further yesterday after eurozone ministers clinched a vital agreement with Greece to unlock more bailout cash and start tackling the country’s debt mountain.
The deal releases €10.3bn ($12bn) in bailout funds that Greece urgently needs to repay big loans to the European Central Bank (ECB) and International Monetary Fund (IMF) in July, having already fallen behind in paying for everyday government duties and wages.
“Stocks extended gains yesterday as a tentative agreement on Greek debt relief and a fresh seven-month high in the price of US oil offered more cause for optimism,” said analyst Jasper Lawler at CMC Markets.
London gained 0.7% and Paris climbed 1.1%. Meanwhile Frankfurt rallied 1.5% after a key survey showed that German businesses are feeling increasingly positive over the economic outlook in the eurozone powerhouse.
The Ifo institute’s business climate index rose by a full point to 107.7 points in May, comfortably outpacing analysts’ expectations, Ifo said in a statement.
The better-than-expected data reinforce the resilient picture of the German economy, which more than doubled its growth pace to 0.7% in the first three months.
The Ifo confirms “the German economy is starting to benefit from an uptick in economy activity of some of their major trading partners like China and the United States”, said analyst Markus Huber, at City of London Markets.
“Banks were top risers for a second day as markets price-in the earnings benefit of a possible US rate rise in the summer,” said Lawler. Madrid-based Santander soared 6.1%, while Societe Generale in Paris jumped 5.9%.
RBS rose 4.4% in London and Commerzbank climbed 3.7% in Frankfurt. The energy sector forged higher on rising oil prices, which boost profits and revenues.
London-listed Royal Dutch Shell was also lifted after it announced another 2,200 job cuts due to low oil prices and following its takeover of smaller rival BG Group.
Shell’s “A” share price rose 1.8%, while rival BP saw its shares climb 2.3%.
French peer Total won 2.2% in Paris.
Back in London, Marks & Spencer plunged 10.2% to after the British retailer warned that a new turnaround plan would constitute a short-term hit on profits.
M&S also revealed that net earnings slid 16% to £406.9mn ($592mn, €529mn) in the group’s financial year to April 2, hit partly by poor clothing sales.
Elsewhere, Asian equities gained ground yesterday, as investors also adjusted to the prospect of a US rate rise in the near future.
New York stocks also pushed higher, with the Down up 0.9% approaching midday.
Analysts at Wells Fargo Advisors said markets were higher “on optimism that the US economy may be strong enough to withstand higher interest rates.”
The Fed has repeatedly stated its intention to continue raising interest rates this year after December’s first hike in nine years.
But until recently investors had discounted the possibility of an imminent increase, given the market panic at the beginning of 2016 on concerns of soft global growth, although a June hike is now increasingly being looked at as likely.
In London, the FTSE 100 up 0.7% at 6.262,85 points; Frankfurt - DAX 30 up 1.5% at 10,205.21 points and Paris - CAC 40 up 1.1% at 4,481.64 points at the close yesterday.
A city train passes the headquarters of Banco Santander in Madrid. Shares of Santander soared 6.1% yesterday.
