European Shares Reach Record Highs due to Gain in Financials

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On Friday, European shares increased to a record high, as there was a gain in UK-exposed financial stocks after a Bank of England official made a hawking comment. Market sentiment also saw a boost due to the prospects of increased fiscal spending in the United States. There was a 0.5% increase in the pan European STOXX 600 index, as it hit a record high of 448.55 points and was scheduled for a 0.8% addition this week. The European blue-chip index and Europe-only STOXX index also increased by 0.4% each, bringing them close to their multi-year highs. 

There was a 0.6% increase in bank stocks, as they reached a 15-month high, due to an increase in bond yields in the euro zone. Gains were led by British lenders, including bank HSBC, after a policymaker for the Bank of England suggested that UK lending rates may see an earlier-than-expected increase. The financial services and insurance sectors were supported by gains in stocks that are UK-exposed, which proved to be the day’s best performing sectors. This year, European stocks have enjoyed support due to optimism regarding economic growth, with a number of economics lifting their COVID-19 restrictions due to a steady vaccination campaign. 

Leisure and travel stocks have also seen a boost due to the reopening measures, and they were set to see a 4.2% jump that would help them in moving beyond their regional peers. Market analysts said that as economies reopen, the coming quarters will see a quick increase in economic activity that has led to improving expectations. There is plenty of room for the euro area to catch up and recoup some of the economic losses they suffered because of the pandemic. However, after the initial bounce, there will be a lot of hard work involved. 

Consumer confidence and European sentiment data, which is scheduled for later in the day, is also expected to show some improvement in May. There was a 0.4% increase in German stocks, as the company is planning to inoculate adolescents with the COVID-19 vaccine from early June. The possibility of greater liquidity also comforted the market, after a report indicated that US President Joe Biden will be seeking federal spending worth $6 trillion for 2022. He will be unveiling a new budget, his first full one, later in the day. Investors were also keeping an eye out on in the favored inflation numbers of the US Federal Reserve, which is also due later.

There was a 0.4% jump in the resources and mining sector, boosted by an increase in copper prices due to hopes of greater demand. There was a decline of more than 2% in Spanish bank Sabadell in individual movers, even after it shared plans of cutting more costs for improving profitability. Airbus, the French planemaker, extended its solid gains on Thursday, as the company reached a high of 15 months after it discussed plans of nearly doubling its output in hopes of travel resuming with the vaccination campaign ongoing throughout Europe. 

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