European stocks rallied during the first week of trading this year, with the Dow Jones STOXX 600 Index posting a 15-month high, amid signs economies are recovering from the worst global recession since World War II.
Rio Tinto Group led a measure of basic resource shares higher for a fourth week after Chinese manufacturing grew the most in five years last month. Allied Irish Banks PLC posted the largest surge in Europe after the Irish Finance Minister Brian Lenihan said the capitalization of the country’s banking system would be resolved by the end of the first quarter.
The STOXX 600 added 2.1 percent to 259.15 this week, a fourth straight weekly advance and the longest stretch of gains in five months. The regional benchmark has surged 64 percent since March, boosted by record-low interest rates in the US and Europe and about US$12 trillion of commitments from governments worldwide to revive credit markets and stimulate growth.
“Of all the asset classes, equities look the most attractive,” said Kevin Gardiner, the head of investment strategy at Barclays Wealth at a press briefing in London. His company oversees about US$215 billion. “Even though the economic recovery may be lackluster, the level of profits growth will underpin more gains in stocks.”
National benchmark indexes gained in all 18 western European markets. The UK’s FTSE 100 rose 2.2 percent and Germany’s DAX advanced 1.4 percent. France’s CAC 40 Index added 2.8 percent.
A measure of European manufacturing, based on a survey of purchasing managers in the 16-nation euro area, increased for a third month in December, Markit Economics said on Monday. A gauge of UK manufacturing from the Chartered Institute of Purchasing and Supply and Markit climbed to the highest level in 25 months.
“Markets are more looking for proper earnings and corporates’ ability to deal with the macro environment,” said Stefan Moeckel, a fund manager at WestLB Mellon Asset Management in Dusseldorf, Germany.
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