European Stocks Head Back Toward Record Amid Deals and Updates

(Bloomberg) -- European equities edged back toward their recent record on Thursday amid positive earnings reports and deal-making, while traders focused on new additions to the region’s benchmarks.

The Stoxx 600 Index was 0.3% higher by the close. The health-care sector was lifted by Swedish Orphan Biovitrum AB, which soared 26% after private equity firm Advent International and Singapore wealth fund GIC agreed to buy the biotechnology firm.

Corporate updates also spurred some big gains, with Poland’s CD Projekt SA climbing 12% after its earnings beat expectations, and Melrose Industries Plc rising 7.2% after first-half results. But an earnings-driven 27% slump in CMC Markets Plc weighed on spread-betting peer IG Group Holdings Plc, which fell 11% and was the worst Stoxx 600 performer.

Data showing that U.S. initial jobless claims fell to a fresh pandemic low last week, thanks to the broader reopening of the economy, had little impact on Europe’s benchmark.

European stocks have started September on a mildly positive mixed note, with the Stoxx 600 Index just 0.3% away from last month’s record, boosted by optimism over an economic recovery and the region’s vaccination push.

Marija Veitmane, senior multi-asset strategist at State Street Global Markets, is “really excited about the performance of European stocks” as the cyclical-heavy region benefits from the global recovery it has lacked.

Jefferies strategists led by Sean Darby said they still favor European financials, citing a pick-up in lending and loose monetary conditions, adding that they see indexes gaining further into the second half.

Index changes in the region saw some muted stock moves. Grocer Wm Morrison Supermarkets Plc and engineering firm Meggitt Plc both rose slightly after the bid targets were promoted to the FTSE 100 Index. Spain’s Banco Bilbao Vizcaya Argentaria SA turned negative and Stellantis NV rose 1.7% after their addition to the Euro Stoxx 50 Index.

Despite Thursday’s gains, recent concerns prompted by hawkish rumblings from the European Central Bank over the possible paring back of pandemic stimulus in Europe have kept European equities rangebound, while China’s regulatory crackdown is also weighing on sentiment.

“Markets are actually fearful, more fearful, that central bank policy support would be ended earlier than they’re comfortable with,” said Peter Chatwell, head of multi-asset strategy at Mizuho International Plc. “That would have more of an adverse reaction to the risk-free assets.”

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