European shares rose on Friday after drugmakers rebounded following a slump in the previous session, and Flutter fanned a rally in the travel and leisure sector after an upbeat earnings forecast.
Shares in GSK PLC, Sanofi SA and Haleon PLC rose between 0.8 percent and 3.6 percent after the drugmakers said that nothing material had changed regarding US litigation focused on heartburn drug Zantac.
The stocks had fallen sharply this week on concerns over potential cancer-causing impurities that prompted the drug’s withdrawal from markets.
The European healthcare sector gained 0.2 percent, with the STOXX 600 index rising 0.16 percent to 440.87.
“We raise [European] pharma from marketweight to overweight, as our macro projections imply scope for 10 percent+ outperformance by the first quarter next year after the sharp recent pull-back,” Bank of America investment strategists Sebastian Raedler and Thomas Pearce said.
However, any rallies in the STOXX 600 are not likely to last, they added.
“The main prerequisite for a sustained rally is a trough in the macro cycle and renewed acceleration in growth momentum, but growth headwinds remain considerable,” they said.
Eurozone Purchasing Managers’ index data is likely to be weaker due to tightening credit, and low Russian gas deliveries raise the risk of winter rationing, which could tip the region into recession, the strategists added.
A European bank agreed to process a payment for the transit of Russian oil through Ukraine, removing the cause of a stoppage of oil supplies to central Europe last week, sources said.
Meanwhile, travel and leisure stocks jumped 3.9 percent to more than two month highs, leading sectoral gains.
Flutter surged 14.4 percent to the top of the travel index, as it saw no sign of cash-strapped customers betting less and gave another positive update on its rapidly growing US business.
Irish stocks added 2.7 percent, boosted by Flutter.
The STOXX 600 index, up for a third straight day, notched weekly gains of 1.18 percent as positive earnings and a softer-than-expected US inflation reading calmed nerves around aggressive rate hikes by the US Federal Reserve, although concerns remain over the path policymakers choose.
European shares have fallen 9.6 percent so far this year compared with a nearly 11 percent decline for Wall Street’s S&P 500 index, which was largely dragged down by drops in big growth stocks in the first half of the year.
London’s blue-chip FTSE 100 gained 0.47 percent — its fourth consecutive week of gains — after data showed Britain’s economy contracted by less than feared in the second quarter.
The FTSE 100 closed at a two-month high of 7,500.89, up 0.82 percent from a week earlier.
The index has outperformed its global peers this year, aided by weakness in sterling and its large exposure to energy and defensive companies.
Sterling slid against a firming US dollar as data showed Britain’s economy contracted by 0.1 percent in the June quarter, compared with forecasts for a 0.3 percent drop.
However, the data still pointed to growing weakness among consumer-facing sectors of the economy, such as retail and restaurants, that are most exposed to a worsening cost-of-living crisis.
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