European stocks rallied on Friday to erase weekly losses as investors focused on a close race between far-right candidate Marine Le Pen and French President Emmanuel Macron ahead of the first round of presidential elections. this week-end.
Financials and materials stocks led the gains, with all major sectors in positive territory. The pan-European STOXX 600 index gained 1.31% to 460.97 and ended the week up 0.57%, with healthcare stocks firming the most during the week.
Leading the index was a 10.2% rise in Banco BPM, after French bank Credit Agricole announced it had bought a 9.2% stake in Italy’s third-largest bank.
“European markets have mostly been catching up with the United States since yesterday’s close,” said Julien Lafargue, chief market strategist at Barclays Private Bank, adding that investors were waiting to get an idea of what the markets might look like. earnings when the major US banks open next week.
“Traders ignored negative headlines about additional sanctions on Russia, as well as talk of higher interest rates from the Fed, but overall it was a negative week for stocks. , as countries have revealed their intention to target energy exports from Russia,” said Equiti Capital market analyst David Madden.
The EU on Friday officially adopted its fifth package of sanctions against Russia, including import bans on coal, timber, chemicals and other products.
Despite recovering 12% from year-to-date lows hit last month, the STOXX 600 index is still down more than 6% so far this year on fears that surging inflation due to the war in Ukraine does not trigger central bank movements that could weigh on growth.
In today’s first round of elections in France, Macron is seen winning, but Le Pen has surged in the polls in recent weeks, leaving his victory within the margins of error.
The two leading candidates in the vote are due to head to a runoff on April 24.
Despite the polls, turnout or lack thereof could swing the election, Lafargue said.
France’s CAC 40 index rose 1.34% to 6,548.22, but fell 2.04% this week – the most among its European peers – due to election uncertainty.
In London, the FTSE 100 closed at an eight-week high, driven by commodities and banking stocks.
The index gained 1.56% to 7,669.56, up 1.75% from the previous week – its highest since February 11 – with oil majors BP PLC, Shell PLC and miner Anglo American PLC up 3.7 to 4.8%.
“The composition of the FTSE 100 is the main reason why the market is outperforming,” said Maarten Geerdink, head of European equities at NN Investment Partners.
“We have a very different landscape for commodities right now…and the natural reaction from equity investors is that if you want to hedge against inflation, you want to buy exposure to commodities,” Geerdink said.
The FTSE 100 is up 3.7% year-to-date on its heavy weighting in energy and mining companies, which have benefited from a sharp rise in oil and metals prices.
Defensive sectors such as pharmaceuticals and utilities boosted markets this week as investors played it safe on concerns over the war in Ukraine and the prospect of a rapid policy tightening by global central banks for control inflation.
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