European Stocks Eye Big Weekly Gains As Risk-On Bets Gather Pace

(Bloomberg) -- European stocks extended gains for a fifth day as risk-on bets poured into this year's beaten-down sectors as US jobs data bolstered speculation that the Federal Reserve is done with interest-rate hikes.

The Stoxx Europe 600 traded  higher by 1:03 p.m. in London, taking their weekly gains to 3.6% — most since March. The real state subgroup led the gains, putting it on track for its best weekly performance ever, helped by easing bond yields. 

There has been a clear shift in stock bets, with traders dumping defensive sectors such as healthcare, and picking up real estate and autos. Rates sensitive sectors are getting a boost as Fed swaps now show 30 basis points of easing by June, up from 23 basis points prior to the economic release. 

Among other stocks, BMW AG rose after the company's automotive operating margin exceeded expectations in the third quarter, with premium vehicle sales helping offset a weakened global outlook for the industry. Danish shipping and logistics company A.P. Moeller-Maersk A/S slumped after announcing plans to cut at least 10,000 jobs in order to shield its profitability in a shipping market that is set to remain weak until about 2026.

European insurers declined after results from AXA SA and Swiss Re AG received a negative reaction. Meanwhile, the IMF has raised concerns about the insurance industry's exposure to private equity, the Financial Timesreported. While the IMF's report focused on the US, Bloomberg Intelligence analyst Charles Graham said “alternative assets have also been a big area of expansion for European insurers as they have looked to maximize returns.”

Job growth in the US moderated in October by more than expected, and the unemployment rate hit a near two-year high, marking a step down from the heated hiring pace seen in the summer. 

“While the number of payrolls dropping was expected, the fact it missed expectations quite significantly can't be ignored by the Federal Reserve and will give it serious thought for its next interest rate decision,” said Richard Carter, head of fixed interest research at Quilter Cheviot.

Carter said the US economy continues to be “incredibly robust and in a strong position, especially when compared to peers,” noted that the job market will need to be closely watched for “signs that the US consumer and corporate America is in trouble.”

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--With assistance from Michael Msika and Macarena Muñoz.

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