European stocks have their best weekly performance in seven months

On Friday European stocks had their best weekly performance in seven months, as a positive start to the earnings season helped reduce investor worries about increasing inflation.

The pan-European STOXX 600 index gained 0.7% to close at a one-month high, ending the week with a 2.6% rise after a sharp rebound in risk appetite in the past two sessions. Banks were the best performers on the index, with a gain of 1.8% after forecastbeating quarterly results from Wall Street's biggest lenders on an economic rebound and deals bonanza. European banks recouped all their pandemic losses to trade at pre-pandemic levels on Friday, while U.S. banks have risen to record highs recently. Retailers, oil & gas and travel all gained between 1.6% and 2%.

European earnings will be out in the next few weeks, with analysts expecting a near 47% jump in third-quarter profit for companies listed on STOXX 600, as per Refinitiv IBES data. Energy and industrial companies are expected to provide the biggest push to earnings performance.

Europe's inflation upsurge is still seen as short-term and there are no signs yet that the recent rise is becoming inserted in wages, European Central Bank President Christine Lagarde said on Thursday.

Investors have worried over soaring inflation caused by a global energy crisis, supply-chain bottlenecks and labour shortages slowing a corporate profit rebound from the pandemic shock.

MSCI's broadest index of AsiaPacific shares outside Japan rose 1.35%, rising 2.1% for the week in its best weekly performance since late June, while Japan's Nikkei gained 1.81%, led by tech stocks.

Concerns that rising oil prices could pressure businesses and the economy also took a backseat for now. Expectations of an oil supply deficit over the next few months as demand rises on the back of relaxed travel restrictions drove oil prices to a three-year high of above $85 a barrel. U.S. crude recently gained 1.13% to $82.23 per barrel and Brent rose 0.83% to $84.70, after reaching a high of $85.10.