European Stocks Set For Best Quarter In A Year As Rally Broadens
European stocks were on track for the best quarterly performance in a year, with investors now expecting the rally to broaden beyond the biggest companies in the region on optimism about interest rate cuts and economic growth.
(Bloomberg) -- European stocks were on track for the best quarterly performance in a year, with investors now expecting the rally to broaden beyond the biggest companies in the region on optimism about interest rate cuts and economic growth.
The Stoxx Europe 600 was up 0.2% at 8:05 a.m. in London ahead of the Easter holiday, marking nearly 7% gains for the quarter. Thursday’s gains were driven by retail and mining sectors.
Among individual movers, Soitec slumped after the company’s outlook came in well below analysts’ expectations. Spirent Communications Plc jumped after Keysight Technologies made an offer for the struggling telecom network testing company, exceeding an earlier bid for the UK company from Viavi Solutions Inc.
The rally in European stocks has broadened out this month beyond the biggest names on the benchmark such as ASML Holding NV and Novo Nordisk A/S unlike the US where the gains remain concentrated in big tech stocks. Automotive, technology and bank stocks are among the best performing in Europe so far this year.
Read more: Europe’s Buy Everything Rally Has Further to Run: Taking Stock
The Stoxx 600 index’s run without a pullback is more impressive: the benchmark hasn’t had a 2% down day for 186 days, the best run since 2017 and the fourth longest since its inception in 1998. While the chances of a pullback have increased after a strong quarter, seasonality is still in favor of equities. Also, April is typically the strongest month of the year for the Stoxx 600 based on average returns over the past three decades.
“The real catalyst for the second quarter will be for inflation to continue to go down and for central banks to actually cut rates in June, because if that doesn’t happen, that would be quite negative,” Arnaud Cayla, deputy CEO at Cholet Dupont Asset Management. “Trading is based on a perfect scenario so there’s no room for error.”
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--With assistance from Julien Ponthus, Michael Msika and Jan-Patrick Barnert.
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