Euro-Area's Biggest Companies Index Enters Bull Market on Trade

(Bloomberg) -- The gauge for the euro-area's largest listed companies closed in a bull market on Wednesday, extending a rally fueled by the trade truce between the U.S. and China as well as by bets on softer monetary policy.

The Euro Stoxx 50 Index gained 0.9% by the close, up about 20% from a late-December low. Equities in the region, led by the tech sector, are getting a boost from the decision by the U.S. and China to resume trade talks. Utilities stocks have also rallied recently amid falling bond yields.

An added boost to sentiment is softer rhetoric from global central banks, which last month signaled openness to rate cuts and further stimulus. In the past 24 hours, Christine Lagarde was nominated to take the helm of the European Central Bank later this year, ushering in a candidate whom analysts anticipate will take up departing President Mario Draghi's mantle in providing stimulus.

“The key driving force behind the recent rally has been the unexpected decision by Draghi to announce much greater central bank support than many investors had expected,” said Andrew Milligan, head of global strategy at Aberdeen Standard Investments in Edinburgh. “Looking ahead, we need to see market expectations of easier central bank policy matched by continued good news from the politicians on trade -- or investor sentiment will turn again.”

Aberdeen is overweight global equities, but neutral on European stocks because of political risk premia.

Some of Wednesday's biggest advancers included Anheuser-Busch InBev NV, which rose 4.1% after a sale of shares in its Asia Pacific beer unit was priced at the high end of the range. Sanofi added 1.5% after Biocorp said it's in exclusive talks about introducing its Mallya connected device into the company's integrated diabetes care platform.

“While the European economy remains slow growing with the important manufacturing sector still suffering from a modest recession as global trade stagnates, there are many multinational companies in Europe with solid global operations,” Milligan said.

To contact the reporter on this story: Ksenia Galouchko in London at kgalouchko1@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Paul Jarvis, Jon Menon

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