CORRECTED-UPDATE 2-European stocks close tad higher, led by gains in banks, energy

  • Reuters
  • Stock Market News
CORRECTED-UPDATE 2-European stocks close tad higher, led by gains in banks, energy

(Corrects paragraph 2 and bullet to say banking index recorded its best five-day rally since "April 2017", not "December 2016"; corrects day to "Tuesday" from "Monday" in paragraph 1)

* Healthcare, utilities, food and beverages fall

* Banks log best 5-day run since April 2017

* Ferrari (NYSE: RACE ) drops in profit-taking after new models unveiled

By Sruthi Shankar and Medha Singh

Sept 10 (Reuters) - A rally in banking shares and other recently battered sectors such as oil and gas and automakers kept the mood buoyant in European stock markets on Tuesday, as investors speculated over policy measures by the European Central Bank later this week.

The pan-European STOXX 600 index .STOXX , after opening in the red, closed 0.1% higher as the banking index .SX7P climbed for a fifth session, its best five-day rally since April 2017.

Oil and gas .SXEP , basic resources .SXPP and automakers .SXAP - among the worst-hit sectors this year on worries over the U.S.-China trade war, Brexit and a global slowdown - gained between 0.2% and 2%.

Investors seeking value were out in full force, buying stocks that have lagged the broader markets this year and driving a turnaround in early losses.

The Austrian stock index .ATX , one of the worst performers of 2019, rose more than 1%, while Swiss shares .SSMI , a top performer, dropped 0.4%.

"Buying the winners and selling the losers has worked really well since the middle of February, but we think performance has been too good," Jefferies strategists wrote in a note.

"We think rotating back to valuations mattering makes sense and we have started to see this happen here in September."

Banks .SX7P outshone amid a recovery for euro zone debt yields as investors tempered hopes of aggressive easing measures from the ECB even as the central bank is expected to cut its deposit rate for the first time since 2016 and restart an asset purchase programme. seems to be anxiety in the market over how much they had already priced in and maybe uncertainty over whether the ECB will deliver to that extent," said Bas van Geffen, an ECB quantitative analyst at Rabobank.

The broad rally in euro zone banks helped Spanish lenders such as Caixabank CABK.MC , Banco Sabadell SABE.MC and Bankia BKIA.MC overcome early weakness after the European Court of Justice said the IRPH mortgage price index used during Spain's property crisis could be considered abusive, potentially causing banks to pay compensation. defensive sectors such as healthcare .SXDP , utilities .SX6P and food and beverages .SX3P were among the biggest losers. The stocks had been in high demand over the past three months amid trade and growth uncertainties.

After a turbulent August, stocks globally were on a firmer footing amid expectations of stimulus from major central banks. Those hopes were further underpinned by weak factory data from China showing prices shrank in August at their fastest pace in three years. MKTS/GLOB

Technology stocks .SX8P , a key growth sector, fell about 1%, tracking their U.S. counterparts lower. .N

JD Sports JD.L topped the STOXX 600 after it reported higher first-half pretax profit, helped by more demand for gym apparel and premium-branded fashion. in French utility EDF EDF.PA sank 7% after warning it had discovered problems with the weldings and other components in some of its nuclear reactors, raising fears about potential closure. shares .FTMIB , meanwhile, dropped 0.6% after a report the new ruling coalition government plans to raise the 2020 budget deficit target to around 2.3% of economic output, bringing it very close to the 2.4% level that almost triggered a European Union disciplinary procedure against Italy this year. NV's shares RACE.MI dropped 6% to the bottom of the FTSE MIB index, with investors booking profits after the automaker unveiled two new cars on Monday. The stock is still up 59% this year.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ European defensives outperform in 2019


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