European equities climbed, posting their longest weekly winning streak since July as investors resumed a rotation into economically sensitive sectors on optimism about COVID-19 vaccines.
The STOXX Europe 600 Index added 0.52 percent to close at 389.61, with miners and energy shares leading the advance. The benchmark is trading near a nine-month high, and was up 1.15 percent — its third straight week of gains.
While the rally paused on Thursday, traders on Friday looked past disputes over stimulus programs in Europe and the US. Hopes of a return to economic normalcy have spurred a sharp rotation into cyclicals and value shares this month, pushing the STOXX 600 toward its biggest monthly gain on record.
“Will 2021 be a good year for European equities? Yes, in our view,” Societe Generale strategists led by Roland Kaloyan wrote in a note. “Like a rising tide lifting all boats, all the laggards have rebounded. Looking ahead, the market is likely to be more selective and companies with structural issues may be left behind.”
Among notable movers, Sage Group PLC slid 13 percent after forecasting slower recurring sales growth next year.
Meanwhile, Banco BPM SpA advanced on speculation of a potential combination with Italian lender BPER Banca SpA.
The STOXX 600 has now recovered more than two-thirds of its declines related to the COVID-19 pandemic. Virus losers including banks and energy shares have rallied strongly, up more than 27 percent each this month.
“With vaccines newsflow accelerating, investors are rediscovering that diversification is key,” Oddo BHF strategist Sylvain Goyon said. “That trend will undoubtedly continue, and with it the value/cyclical rotation, but it may not be a smooth ride.”
London’s FTSE 100 on Friday inched higher, logging its third straight week of gains, on the prospect of easing COVID-19 restrictions, optimism around a vaccine and hopes of an EU trade deal.
After rising as much as 0.8 percent in afternoon trade, the blue-chip index closed 0.27 percent higher at 6,351.45, boosted by aero and pharmaceutical stocks, with energy and mining shares also tracking commodity prices higher.
Data showed that British retail sales last month rose a higher-than-anticipated 1.2 percent ahead of the recent restrictions, while consumer confidence sank to a six-month low this month.
A Reuters poll found that the UK is on course for a double-dip recession as a result of the renewed lockdown measures.
“We are having catch-up of exuberance around a possible vaccine and an end to the COVID-19 uncertainty,” Brooks Macdonald chief investment officer Edward Park said. “Market is taking all data with a pinch of salt because there’s so much uncertainty about how the level of restrictions will need to be over the coming few weeks.”
Meanwhile, British Secretary of State for Health and Social Care Matt Hancock said that the government might allow a Christmas period with less stringent restrictions as domestic COVID-19 cases were starting to flatten.
The FTSE 100 rose only 0.55 percent for the week, following a jump of about 13 percent in the past two weeks, as uncertainty over EU trade negotiations also capped gains.
The EU’s chief executive on Friday said that better progress towards a trade deal with Britain had been made the last few days, but there was still a lot of work to do for an agreement to be in place by the end-of-year deadline.
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