European shares on Friday reached their highest levels in more than a year, while the UK’s FTSE 100 also closed higher, with both markets ending their fourth straight week of gains, buoyed by positive earnings from major US banks and hopes of an end to the US Federal Reserve’s rate-hiking cycle.
The pan-European STOXX 600 closed up 0.58 percent, after hitting its highest level since February last year earlier in the session. The index gained 1.74 percent for the week, clocking its longest weekly winning streak so far this year.
The blue-chip STOXX 50 index also advanced 0.63 percent, hitting a 22-year peak.
European shares have gained momentum in April with France’s CAC 40 hitting record highs multiple times in a row, following evidence of cooling US inflation as well as an improving outlook for the eurozone economy.
“April is one of the strongest months of the year [for Europe stocks], so you tend to see strong seasonal inflows. Also, investors have been optimistically pricing in two Fed rate cuts at the second-half of this year and maybe only one more rate hike to come,” HYCM chief market analyst Giles Coghlan said.
European banks on Friday were the top gainers on the STOXX 600, rising 3 percent to a one-month high after upbeat first-quarter earnings from big banks in the US, which had been keenly awaited following the recent turmoil in the banking sector.
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“So far, we have seen that deposit outflows have been manageable, but any stress there [in the US] could be transferred to Europe, then the European banks may have to diversify their portfolios,” Morningstar Research Services LLC senior equity analyst Michael Field said.
Rate-sensitive real-estate stocks gained 1.8 percent.
Also lifting sentiment was the Monetary Authority of Singapore keeping its key rates unchanged.
European Central Bank policymakers have been backing more interest-rate increases, with President Christine Lagarde saying that underlying price pressures, boosted by rapid nominal wage growth, are likely to remain high for some time.
In London, the blue-chip FTSE 100 closed 0.36 percent higher at a one-month high, while gaining 1.68 percent weekly, boosted by banks such as HSBC Holdings PLC and Barclays PLC.
The broader bank sector surged 2.6 percent, reaching its highest in a month.
“It doesn’t surprise me that the biggest UK banks tended to take their cue from JPMorgan [Chase & Co] and other earnings in the US,” Interactive Brokers LLC chief strategist Steve Sosnick said.
“Being the two big leaders, investors are heartened that large banks are still faring well,” he said.
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