Europe Stocks Rise, Trimming Weekly Loss as Italian Banks Surge

(Bloomberg) -- European shares rebounded for a second day, extending gains after a U.S. jobs report showed an improvement in U.S. hiring, with Italy's benchmark gauge surging the most since April.

In a broad rally, the Stoxx Europe 600 Index added 1.6 percent at the close of trading in London, trimming its weekly decline to 1.5 percent. Payrolls in the U.S. rose by by the most since October and exceeded the highest estimate in a Bloomberg survey.

“You saw an up trend immediately after the figures were announced,” said Guillermo Hernandez Sampere, the head of trading at MPPM EK in Eppstein, Germany. His firm manages about 250 million euros ($275 million). “It's more the short-term money that was playing the figures, and it will take a bit of time for the market to digest the news.”

Banks and automakers rallied the most since June 20, with Italian lenders sending the nation's FTSE MIB Index up 4.1 percent. Fiat Chrysler Automobiles NV and Renault SA jumped more than 5.7 percent after data showed China's car sales grew faster in the first half of the year. Energy producers erased an earlier slide.

While equities are rebounding, concern over the strength of the Italian banking system and the repercussions of the U.K.'s vote to leave the European Union hit the market, sending European shares for a fifth weekly drop in six. Earlier this week, lenders in the Stoxx 600 hit their lowest levels since the height of the region's crisis in 2011, insurers fell to an almost three-year low, and property-related stocks in Britain sank as several funds suspended withdrawals.

Italy's Banco Popolare SC surged 18 percent after saying its own stress tests showed “resilience” to adverse shocks. Banca Popolare dell'Emilia Romagna SC climbed 16 percent as its chief executive officer said its stress tests are “going well,” and Banca Monte dei Paschi di Siena SpA added 5.5 percent after reaching a record low. Its chief executive officer said the lender is working “intensely” with authorities to quickly resolve its bad-loan burden.

To JPMorgan Asset Management, valuations for European equities look attractive when their price-earnings ratios are adjusted for inflation over the past 10 years. Stephen Macklow-Smith, head of European equity strategy at the $1.7 trillion asset manager, says Europe's recovery is still young and looks durable, making the region's stocks a buy.

Among other stocks moving on corporate news, TDC A/S rallied 9.2 percent, the most since 2008, after saying it received a takeover approach, responding to a report that Apollo Global Management LLC is interested in buying the Danish phone carrier and taking it private.

To contact the reporter on this story: Aleksandra Gjorgievska in London at agjorgievska@bloomberg.net. To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net.