Autos and banks were driving strong gains for Europe’s main stock gauge on Monday, as a dismal month for equities nears an end.
A big bump for heavyweight HSBC Holdings PLC and some relief that Italian debt wasn’t downgraded to junk status by a major ratings agency, underpinned the market. And reports that China could cut car-tax purchases sent auto stocks soaring.
What are markets doing?
The Stoxx Europe 600 SXXP, +1.64% shot up 1.2% after Friday’s 0.8% drop and a 2.5% weekly fall. For the month, the index is down nearly 7%.
Italy’s FTSE MIB Italy index I945, +2.63% leapt ahead, climbing 2.5% to 19,151.02. Germany’s DAX 30 DAX, +2.12% shot up 1.8% to 11,410.60, while France’s CAC 40 PX1, +1.13% inched up 0.3% to 4,980.45. The U.K.’s FTSE 100 UKX, +1.86% surged 1.5% to 7,045.66.
Greece’s ASX Composite GD, +1.34% rose 1% to 693.82.
The euro EURUSD, -0.0175% was wobbling at $1.1345, after a late-session level in New York on Friday of $1.1403. The pound GBPUSD, +0.0780% was trading at $1.2836 from $1.2828.
What is driving the market?
Futures pointed to a firmer start for Wall Street stocks, after a weaker finish on Friday that left the S&P SPX, -1.73% and Dow industrials DJIA, -1.19% negative for the year.
Investors were trying to come to grips with reports that German Chancellor Angela Merkel after will not seek re-election as the leader of the ruling Christian Democratic Union at a party conference in December, but wants to remain as chancellor. Merkel suffered a fresh blow after both her party and its coalition partner saw hefty losses in Sunday’s election in Hesse, one of Germany’s wealthiest states. Those parties also saw losses in an election in the state of Bavaria earlier in October.
Elsewhere, there was some upbeat news for Italy after S&P Global Ratings left Italy’s sovereign credit rating at BBB, two notches above junk, though it changed the outlook from stable to negative. Investors had been concerned S&P would follow recent action by Moody’s Investors Service, which knocked down Italy’s credit rating by one notch, a single rung above sub-investment grade status.
Politics were also in play in the U.K., where Chancellor Philip Hammond will deliver his last budget before Brexit. He is expected to show a period of austerity is ending. A promise to boost government spending could provide support for the British pound. That could weigh on the FTSE 100, as the index’s multinational companies generate most of their sales in other currencies.
What are strategists saying?
“The recent results in Bavaria and Hesse have made it clear that Merkel’s days are numbered as anyone associated with the party is suffering at the polls,” said Craig Erlam, senior market analyst at Oanda, in emailed comments. But he added that her stepping down might “steady her government and halt the decline for her party.”
Stock movers
European car shares soared after a report China’s regulator planned on cutting by half a tax on most car purchases by 50 percent to spur buying. Daimler AG DAI, +0.10% soared 4.6% and Volkswagen AG VOW3, +0.41% soared over 6%, and Peugeot SA UG, +4.86% shot up over 5%.
The banking sector also kicked in with gains, as HSBC HSBA, +5.97% HSBC, -1.23% surged nearly 6% after third-quarter profit beat forecasts.
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