European Stocks Rally as Attractive Valuations Tempt Dip-Buyers

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European Stocks Rally as Attractive Valuations Tempt Dip-Buyers

(Bloomberg) -- European equities posted their best day in nearly two months on Friday as bargain hunters scooped up shares that haven’t been this cheap since the start of the pandemic.

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The Stoxx Europe 600 Index closed 2.1% higher following a rally in US peers, as enticing valuations outweighed concerns about higher interest rates and soaring inflation. Travel and leisure, technology, energy and consumer products stocks were among those leading gains, while defensive shares such as real estate, telecommunication and utilities underperformed.

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“We believe it is imperative for investors to adopt a value-based approach in the current market environment,” said Dan Ivascyn, group chief investment officer and managing director at Pacific Investment Management Co. Some sectors “look attractive” after the recent selloff, he said.

The region’s equities have slumped this year as traders fretted over the impact that inflation and tighter monetary policy will have on the economy as well as the implications of the war in Ukraine. The Stoxx 600 is now down about 12% from its January record high, though Friday’s rally helped it snap a four-week losing streak.

While equities “are not screaming buy yet, there are certainly areas of opportunity right now amidst what is a clearly volatile period” after company earnings remained relatively resilient in the first quarter, Richard Saldanha, a global equity fund manager at Aviva Investors Global Services Ltd., said on Bloomberg Television. “There is growth out there. Investors just need to take a longer-term investment horizon.”

To be sure, the selloff in European equities could continue amid concerns around economic growth, but “the panic button has not been hit yet” and there’s little sign of retail traders giving up on stocks, Barclays Plc strategists led by Emmanuel Cau wrote in a note.

Among individual movers, Deutsche Telekom AG climbed after raising guidance for 2022 following strong growth in Europe and the US. Rheinmetall AG and Volvo Car AB gained after being added to MSCI Inc.’s global standard indexes.

MARKETS

  • Equities: Euro Stoxx 50 up 2.5%, FTSE 100 up 2.6%, DAX up 2.1%, CAC 40 up 2.5%, FTSEMIB up 2.0%, IBEX 35 up 1.7%, AEX-Index up 2.8%, Swiss Market Index up 1.3%

  • Bonds: German 10-year-yield up 10bps at 0.94%, Italian 10-year-yield up 13bps at 2.84%, Spanish 10-year-yield up 11bps at 2.0%

  • Credit: iTraxx Main down 2.9bps at 92.4, iTraxx Crossover down 14.0bps at 445.8

  • FX: Euro spot up 0.29% at 1.041, Dollar index down 0.32% at 104.52

  • Commodities: Brent crude up 3.0% at $110.7/bbl, copper up 0.5% at $9,135/MT, iron ore up 0.2% at $131.2/MT, gold down 0.6% at $1,810.51/oz

EUROPE EQUITIES

  • 20 out of 20 Stoxx 600 sectors rise; food & beverage sector has the biggest volume at 141% of its 30-day average; 534 Stoxx 600 members gain, 62 decline

  • Top Stoxx 600 outperformers include: Evotec +12.8%, Oxford Nanopore Technologies +11.8%, Storskogen Group +11.4%, Fortum +11.1%, Uniper +10.7%

  • Top Stoxx 600 underperformers include: UCB -13.6%, Etablissements Franz Colruyt -5.1%, FUCHS PETROLUB -5.1%, LEG Immobilien -4.6%, Vestas Wind Systems -4.4%

  • For a daily wrap highlighting the biggest movers among EMEA stocks, click here

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