European Equities Post Biggest Quarterly Advance in Five Years

European shares edged higher on the final day of their best quarter since March 2015, as investors continued to weigh the region’s economic recovery against the risk of rising virus infections.

The Stoxx Europe 600 Index added 0.1% at the close, after fluctuating between gains and losses as the World Health Organization warned that the worst of the coronavirus pandemic is still to come. Tech shares and miners outperformed, while Royal Dutch Shell Plc dragged energy shares lower after warning of a record writedown. The benchmark is up 13% for the quarter, boosted by a strong rotation into cyclicals since mid-May.

European equities posted a third straight monthly advance, helped by unprecedented stimulus measures and optimism that major economies can ease lockdowns without spurring a second wave of coronavirus infections. That’s building a case for the region’s stocks to continue a rare outperformance over the U.S., where infections are on the rise in several states.

European Equities Post Biggest Quarterly Advance in Five Years

“Investors continue to weigh up rising coronavirus figures against signs of economic recovery and rising U.S.–China tension,” said Fiona Cincotta, a market analyst at City Index. “Whilst rising coronavirus numbers and flare ups across the globe are keeping investors on edge, improving economic data is going some way to distracting investors.”

Historically, Europe is entering prime time. July is the period that the Stoxx 600 has posted its biggest monthly gain on average over the past decade. And it’s chased up a May advance with one in June for the first time since 2005.

All industry groups rose in the second quarter, except oil-and-gas shares, suffering from still weak demand for crude and delayed or cut dividends in the sector.

Although tech shares are the biggest gainers, closing their best quarter since 2001, cyclicals have largely outperformed their defensive peers in the period. Carmakers jumped the most in five years and miners the most since 2010, while food-and-drink stocks lagged behind.

©2020 Bloomberg L.P.

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