European stocks rack up hefty gains as cyclicals rally

By Sruthi Shankar

(Reuters) – European stocks racked up their best week in two months on Friday, with investors scooping up battered shares of banks, automakers and travel companies amid growing signs that the pandemic-hit global economy is recovering.

The pan-European STOXX 600 <.STOXX> ended the day 2.5% higher, getting an afternoon boost from data that showed U.S. economy unexpectedly added jobs in May after suffering record losses the prior month.

Euro zone blue chip stocks <.STOXXE> jumped 3.8% and the bloc’s lenders <.SX7E> rallied 7.6% for their best weekly gain since 2008’s global financial crisis.

Risky assets across the world have been lifted this week as economies continued to emerge from their lockdowns, while a bigger-than-expected stimulus package from the European Central Bank and hopes for European-Union wide fiscal action gave a further boost to the continent’s markets.

Growth-sensitive cyclical sectors that have suffered badly during the coronavirus crisis, such as oil & gas <.SXEP>, automakers <.SXAP> and travel & leisure <.SXTP>, were up between 4.9% and 5.8%.

The auto-heavy Germany DAX <.GDAXI> is just 6.7% away from hitting an all-time high.

“It only takes a small change in sentiment toward these stocks – a glimmer of optimism that the virus is under control or ever increasing stimulus – and investors will question whether the reversal has begun,” said Lewis Grant, a senior portfolio manager at Federated Hermes.

“These rallies can become self-sustaining as more investors rush in through fear of missing out,” he added.

Analysts at Bank of America on Friday forecast European stocks would rise another 10% by the end of September on expectation of a pick-up in business activity.

(Graphic: European stocks recover nearly 2/3rd of virus-led losses,

Hopes of a revival in tourist traffic helped British Airways owner-IAG <ICAG.L> jump 13.6%, while shares in easyJet <EZJ.L>, Lufthansa <LHAG.DE> and Air France <AIRF.PA> gained between 5.5% and 12.5%.

Airbus <AIR.PA> rose 12.5% after Australia’s Qantas <QAN.AX> announced plans to reactivate plans to order planes.

German fashion house Hugo Boss <BOSSn.DE> was up 11.4% after it confirmed ongoing talks for a new chief executive officer with Daniel Grieder, former head of Tommy Hilfiger Global & PVH Europe.

(Reporting by Sruthi Shankar and Aaron Saldanha in Bengaluru; Editing by Arun Koyyur, Kirsten Donovan)