Banks push European markets to their fourth straight week of gains

A surge in banks, miners and automakers galvanized European stocks on Friday, as continued rotation into the cyclical sectors amid signs of progress in U.S.-China trade talks drove the STOXX 600 to its fourth straight week of gains.

In a week that saw trade tensions between Washington and Beijing thaw and the European Central Bank cut rates deeper into negative territory and relaunch bond purchases with no scheduled enddate, banking shares were the star performers.

Euro zone banks, which wavered after the ECB decision on Thursday, rallied 2.4%, with analysts citing the central bank’s easing of the terms of its long-term loans to banks and introduction of tiered deposit rate as offsetting the pain of negative rates. The euro zone banks index, up 7% on the week, tacked on its biggest weekly gain since March 2017.

Indeed, Italian banks rallied with a 3.2% gain, with main indexes in Milan and Madrid rising between 0.4% and 0.6%, respectively.

Deutsche Bank rose 3% after becoming the first of 16 financial services companies to resolve claims that it conspired to rig prices of bonds issued by Fannie Mae and Freddie Mac. In a change of heart among investors who had been buying defensive stocks for much of this year on worries about global trade disputes tipping the world into a recession, momentum stocks such as automakers and miners saw a huge demand this week.

Trade-reliant commodity-linked miners jumped 2.7%, leading gains among major European sectors, and automotive stocks were boosted by fresh indications that a prolonged trade war between the United States and China was thawing.

After Beijing and Washington made tariff concessions to each other, U.S. President Donald Trump said he could consider an interim trade deal with China ahead of high-level negotiations in October.

Both the pan-European STOXX 600 index and the euro zone only index closed about 0.3 higher on the day, while tacking on more than 1% for the week.