Europe Stocks Post Best Start to Year Since 2009 on Stimulus Bet

(Bloomberg) -- European equities posted their best first five trading days of a year since 2009 as investors bet that coronavirus vaccination programs and government stimulus will drive a rebound in economic growth and corporate profits.

The Stoxx Europe 600 Index added 0.7% by the close in London, taking the week's rise to 3%. A benchmark tracking European tech stocks soared to its highest in almost 20 years as chipmakers were boosted by earnings reports from U.S. and Asia bellwethers. Travel and utilities were among other gaining sectors, while banks and telecoms slipped.

Markets are continuing to react positively to the prospect of added government spending in the U.S. after the Democrats secured control of the Senate, according to Alexandre Tavazzi, global strategist at Pictet Wealth Management. The situation is “close to ideal” for stocks, as a lack of a strong majority will also make it difficult for Democrats to implement tax rises, Tavazzi said in written comments.

Optimism has prevailed since the first Covid-19 vaccine was announced in early November, according to analysts at HSBC Holdings Plc. The European Union said Friday that it secured an extra 300 million doses of the shot produced by Pfizer Inc. and BioNTech SE, while the U.K. cleared Moderna Inc.'s vaccine.

European equity market momentum and possibly even the recent value rally may be sustained as earnings and economic growth look very strong coming off a low base, HSBC strategist Edward Stanford said.

Giles Rothbarth, manager of the BlackRock European Dynamic Fund, said he expects earnings to accelerate “across the breadth of the market.” Rothbarth favors cyclical exposure and companies with recovery potential, as well as firms that benefit from the region's focus on improving environmental outcomes. Renewable energy, specialty chemicals and semiconductors are some areas offering the best opportunities, he said.

Among individual stocks moving on Friday, TUI AG surged 24% as a mix of confusing information about the company's 544.6 million-euro ($669 million) rights offering and a lack of stock to borrow squeezed the shares higher.

Marks & Spencer Group Plc erased a gain to drop 2.4% after the U.K. retailer's better-than-expected quarterly growth in food sales was offset by weakness in clothing and home. Credit Suisse Group AG, meanwhile, fell 3.6% after the bank said it expects to post a fourth-quarter loss.