Lenders lead European stocks set for best month since October

European shares extended their biggest monthly gains since October, with banks leading the gains amid earnings results.

Barclays Plc jumped 6.3 per cent as fixed-income trading revenue outperformed European rivals and it said the non-core unit will weigh less on profit in 2017. Banco Bilbao Vizcaya Argentaria SA rose 3 per cent after reporting quarterly earnings that beat analysts’ estimates. France’s Natixis SA gained 7 per cent as its profit and revenue beat projections. Italy’s Banca Monte dei Paschi di Siena SpA added 1.4 per cent after it received a proposal to turn around the the ailing lender.

The Stoxx Europe 600 Index climbed 0.4 per cent at 3:41pm in London, paring an earlier gain of as much as 0.7 per cent. Federal Reserve Bank of San Francisco President John Williams said the central bank will raise rates over the next couple of years, while data on economic growth and sentiment missed estimates. The benchmark has risen 3.3 per cent in July. Banks rose the most among industry groups today, before stress-test results due after market close. Declines in energy producers tempered the advance amid a slide in oil.

“The main fear for 2016 was a possible recession for the second half, and there has been no evidence in that direction so far,” said Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany. His firm oversees €250 million (RM1.1 billion). “It took some time to understand that the spirit was much worse than the actual situation. A lot of companies have beaten or even increased their forecasts.”

European lenders headed for their best month since February 2015, rebounding 5.7 per cent after their worst losses since October 2008. The moves in Italian banks took the benchmark FTSE MIB Index up 1.3 per cent today, among the best gains in western-European markets.

That’s even as data showed a slowdown in euro-area growth to 0.3 per cent in the second quarter, and a rise in Italy’s jobless rate in June. Separately, the region’s inflation unexpectedly accelerated to 0.2 per cent in July, the strongest since January.

Despite the strong advance this month, July was marked by record outflows from European stock funds and thin volume, indicating a lack of conviction in the rally. The Stoxx 600 remains below its level on the day of the UK vote on European Union membership, while equities from the US and Asia have recovered.

Among other stocks moving on earnings today:

* Electricite de France SA surged 5.5 per cent as its earnings beat projections and it maintained its 2016 objectives, even as the British government cast doubt on the future of a nuclear-power project in the UK.

* ArcelorMittal rallied 5.6 per cent after posting its highest quarterly profit since 2014.

* L’Oreal SA dropped 4 per cent after reporting sales that missed analysts’ estimates amid worsening conditions in its home market, France.

* Sanofi slid 1.1 per cent as its profit and revenue declined.

* Foxtons Group Plc tumbled 8.8 per cent after posting a decline in first-half revenue and saying second-quarter results showed a sharp contraction.

In other corporate news, Anheuser-Busch InBev NV climbed 3.4 per cent after SABMiller Plc was said to recommend an improved offer from the Belgian brewer after the deal hit a snag earlier this week. China’s Ministry of Commerce also conditionally approved the transaction. SABMiller added 3.3 per cent.

Mediaset SpA sank 8 per cent as the Italian media company rejected an alternative proposal for an alliance with Vivendi SA, after a conflict that broke out suddenly this week. Vivendi lost 0.6 per cent.