European shares on Friday rebounded from six-months lows, ending a tumultuous week on a positive note as hopes of fiscal stimulus from Germany lifted sentiment and sparked a rally in the battered banks sector, helping them post their best day in four-and-a-half months.
Germany’s right-left coalition government would be prepared to ditch its balanced budget rule and take on new debt to counter a possible recession, Der Spiegel magazine reported.
Germany’s DAX, pressured of late by fears of a slide into recession as trade tensions between the US and China flare up, on Friday rose 150.07 points, or 1.3 percent, to 11,562.74, a 1.1 percent decrease from 11,693.80 on Aug. 9, and German bonds came off lows after the report.
“The market is appearing to have some confidence that Germany will actually conduct some amount of fiscal stimulus while being on the brink of recession,” INTL FCStone Financial Inc global market strategist Yousef Abbasi said in New York.
“This would be awfully encouraging. You could potentially see money rotate out of the US and into Europe considering the divergence of performance and valuation we’ve had in the two developed markets,” he said.
Banks, which have lost nearly 8 percent this month and have been pressured by tumbling bond yields, were the top gainers on Friday, up 2.4 percent to log their best session since early April.
With all other sectors also in the black, the pan-European STOXX 600 on Friday rose 4.54 points, or 1.2 percent, to 369.63, adding to morning gains when stimulus hopes from Beijing had supported risk appetite.
However, the index extended losses to a third straight week, down 0.5 percent from 371.56 on Aug. 9, as worrying headlines of a global recession kept investors on edge, largely because of the trade drama.
Central bank stimulus hopes also added to the optimism after comments on Thursday by Bank of Finland Governor Olli Rehn, a European Central Bank policymaker, fueled expectations for aggressive easing by the central bank soon.
The tech sector rose 1.7 percent, propped up by chipmaker stocks after solid earnings from Nvidia Corp and chip gear maker Applied Materials Inc.
AMS AG, Infineon Technologies AG and STMicroelectronics NV rose between 1.2 percent and 2.1 percent.
While all major indices in Europe rose more than 1 percent, Britain’s blue-chip FTSE 100 on Friday finished up 50.14 points, 0.7 percent, at 7,117.15 — down 1.9 percent from 7,253.85 a week earlier — lagging slightly after an outage at the London Stock Exchange due to a technical glitch cut trading short by almost two hours.
In corporate news, specialty chemicals company IMCD slumped 15 percent to the bottom of the STOXX 600 after it reported weaker-than-expected organic sales in the second quarter.
Additional reporting by staff writer
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