European shares rallied yesterday, with stronger than expected German sentiment data prompting investors to return to economically sensitive sectors like autos and technology after a three session losing streak.
The keenly-watched German ZEW investor sentiment index jumped to a three-year high this month, beating even the most optimistic economist forecasts.
The data gave an early flavour of the kind of economic improvement that strategists and investors are counting on to fuel European equity market gains for this year.
“Some investors are asking if the improvement in leading indicators is sustainable, and we think it is,” said Andreas Huerkamp, equity strategist at Commerzbank.
“The start of recovery of leading indicators should continue and then, in the second quarter, companies will start to become more optimistic again. zThat should trigger the next upwards move in the market.”
A strong start to the week on Wall Street – which had been closed on Monday for a public holiday – also fuelled appetite for European equities, helping the market extend gains in afternoon trade.
The pan-European FTSEurofirst 300 index provisionally closed up 1.1 per cent at 1,172.23 points – more than recovering the previous three session’s losses to post its best finish in three weeks.
US stocks were boosted by news of yet another possible merger that suggested there is still room to the upside. The S&P 500, hovering near a five-year high, extended its seven-week winning streak. The benchmark index is already up seven per cent for the year.
Office Depot Inc, the No. 2 US office supply retailer, and smaller rival OfficeMax Inc are said to be in advanced talks to merge.
The deal would be the latest addition to more than $158 billion in US deals announced thus far in 2013. Last week, deals were reached for the acquisition of H.J. Heinz Co by Berkshire Hathaway and the sale by General Electric of its remaining stake in NBCUniversal to Comcast.
The Dow Jones industrial average was up 45.69 points, or 0.33 per cent, at 14,027.45. The Standard & Poor’s 500 Index was up 8.03 points, or 0.53 per cent, at 1,527.82. The Nasdaq Composite Index was up 12.18 points, or 0.38 per cent, at 3,204.21. In the currency market, the yen climbed after two days of losses after Japanese Finance Minister Taro Aso said he was not considering foreign bond purchases.
The euro was down 0.2 per cent against the yen at 125.21 yen. Against the dollar, the euro recovered by midday to hit the day’s high of $1.3394. It was last at $1.3387, up 0.3 per cent in mostly choppy trading.
Brent crude oil fell for a third session in a row on signs of lackluster European growth and easing geopolitical tensions. Brent crude for April delivery was down 38 cents at $117 per barrel, while US crude for March added 8 cents to $95.94 a barrel.