European shares on Friday rallied to erase weekly losses, while investors focused on a tight race between far-right candidate Marine Le Pen and French President Emmanuel Macron in the run-up to the first round of presidential elections over the weekend.
Financials and commodity stocks led the gains, with all major sectors in positive territory. The pan-European STOXX 600 index gained 1.31 percent to 460.97and ended the week 0.57 percent higher, with healthcare stocks firming the most on the week.
Topping the index was Banco BPM’s 10.2 percent surge, after French bank Credit Agricole said it has bought a 9.2 percent stake in Italy’s third-largest bank.
“European markets are mostly playing catch-up with the US from yesterday’s close,” Barclays Private Bank chief market strategist Julien Lafargue said, adding that investors are waiting to get a sense of what earnings could look like when big US banks open next week.
“Traders have shrugged off the negative headlines about additional sanctions on Russia, as well as the chatter about higher interest rates from the Fed, but by and large, it was a negative week for equities, as countries revealed plans to target Russia’s energy exports,” Equiti Capital market analyst David Madden said.
The EU on Friday formally adopted its fifth package of sanctions against Russia, including bans on imports of coal, wood, chemicals and other products.
Despite a 12 percent recovery from one-year lows hit last month, the STOXX 600 index is still down more than 6 percent so far this year on worries that surging inflation due to the Ukraine war might trigger central bank moves that could squeeze growth.
In today’s first round of elections in France, center-left Macron is seen winning, butLe Pen has surged in polls in the past few weeks, leaving her victory within the margins of error.
The two leading candidates from the vote are to head to a run-off on April 24.
Despite the polls, the turnout or lack thereof could swing the election, Lafargue said.
France’s CAC 40 index rose 1.34 percent to 6,548.22, but is down 2.04 percent this week — the most among its European peers — on election uncertainty.
In London, the FTSE 100 closed at an eight-week high, lifted by commodity and banking stocks.
The index gained 1.56 percent to 7,669.56, up 1.75 percent from a week earlier — its highest since Feb. 11 — with oil majors BP PLC, Shell PLC and miner Anglo American PLC rising 3.7 to 4.8 percent.
“The make-up of the FTSE 100 is the biggest reason why the market is outperforming,” said Maarten Geerdink, head of European equities at NN Investment Partners.
“We’ve a very different landscape for commodities at this time ... and the natural reaction from equity investors is if you want to hedge yourself against inflation, you want to buy into commodity exposure,” Geerdink said.
The FTSE 100 is up 3.7 percent so far this year due to its heavy weighting in energy and mining companies, which have benefited from a sharp rally in oil and metal prices.
Defensive sectors such as pharmaceuticals and utilities boosted markets this week as investors played it safe amid concerns about the war in Ukraine and prospects of rapid policy tightening by global central banks to tame inflation.
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