Banks lead European stocks higher ahead of Fed projections

European shares rose on Wednesday, led by banks, with investors awaiting the U.S. Federal Reserve’s first economic projections since the COVID-19 pandemic set off a recession in February.

After trading lower in the past two sessions, the pan-European STOXX 600 gained 0.6%, with financial services, personal and healthcare and retail stocks rising the most.

Banks rose 1%, providing the biggest boost, after sources told Reuters European Central Bank officials were drawing up a scheme to cope with potentially hundreds of billions of euros of unpaid loans. According to the plan, the ECB had set up a task force to look at the idea of a “bad bank”, a source said.

Commerzbank gained 2.7% after U.S. activist investor Cerberus called for changes to the supervisory board and strategy, including more cost cuts. Adding to the positive sentiment, Credit Suisse Chief Executive Thomas Gottstein said that business conditions are improving after a tough start to the year.

European markets have seen a broad recovery in the recent weeks, with investors moving into cheap, growth-sensitive stocks such as those of banks and oil firms on hopes that the worst fallout from the health crisis is over.

While no major policy announcements are expected when the Fed wraps up its meeting later in the day, investors will scrutinize its remarks on the health of the U.S. economy. The central bank’s projections are expected to signal a collapse in output this year and near-zero interest rates for the next few years.

Inditex gave up early losses after the Zara owner said in-store sales and customer activity had returned to pre-coronavirus levels in some Asian countries. Swiss asset manager GAM Holding jumped 3.1% after its chief executive said in a newspaper interview it was no longer actively looking for a buyer or major strategic investor.

This article was compiled by BOV Asset Management Limited, a member of the BOV Group. BOV Asset Management,TG Complex, Suite 2, Level 3, Brewery Str., Mriehel BKR 3000. Email: infoassetmanagement@bov.com Internet address: www.bovassetmanagement.com. BOV Asset Management is licensed by the MFSA.