European shares rise on faith in rebound

European equities advanced Wednesday as investors wagered that the global economic rebound would persist even as central bankers contemplate scaling back stimulus.

The Stoxx Europe 600 Index closed 0.5-per-cent higher after gaining as much as 0.9 per cent earlier. Travel and leisure and retail were among the best performers, while technology followed Chinese peers higher. Miners underperformed as iron ore futures slid. Spain’s IBEX 35 outperformed, rising 1.6 per cent, the most in a month.

After hitting a record high a few weeks ago, European shares have struggled for direction as economic statistics pointed to a more sluggish rebound than forecast and as monetary policy-makers on both sides of the Atlantic suggested stimulus may be tapered. Still, August was the Stoxx 600’s seventh positive month in a row — the longest winning streak since 2013. And the index is now less than one per cent away from a record high.

Investors may have factored in some of those lingering risks, according to Richard Dunbar, head of multi-asset research at Aberdeen Standard Investments: “Markets had already taken quite a lot of that on board,” he said by phone.

European shares may also be playing catch-up on the second-quarter earnings season, according to Dunbar. “Stock markets haven’t really bounced on the back of those better-than-expected results, so in essence we’ve had somewhat of a de-rating.”

Amid the threat posed by the COVID-19 Delta variant, economic rebound hopes were further fuelled Wednesday by news that the European Union had fully vaccinated 70 per cent of its adult population. Survey data, meanwhile, showed unfilled orders at Europe’s factories have risen to an unprecedented level.

“Global growth, though likely past the peak, looks set to remain,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note to clients prior to the data release.

Meanwhile, the debate over the European Central Bank’s policy path has ramped up ahead of a policy update next week, with Governing Council member Yannis Stournaras saying rising prices shouldn’t be over-interpreted, but the more-hawkish Jens Weidmann cautioning that inflation risks shouldn’t be disregarded.

Georgina Taylor, a multiasset fund manager at Invesco Asset Management Ltd. says policy remains accommodative: “Starting to just reduce quantitative easing is not the same as rate hikes,” she said in a Bloomberg Television interview.

Among individual movers on Wednesday, Pernod Ricard SA gained 3.7 per cent, the most since November, after the distiller reported sales growth that was ahead of consensus, while grocer Carrefour SA fell 5.5 per cent as billionaire Bernard Arnault sold his remaining holding.