European shares rose on Monday, starting the second half of the year on a stronger footing with oil stocks and banks leading a broad bounce off lows hit last week on concern over tightening monetary conditions. The pan-European STOXX 600 index rose 1.1 percent after ending at two-month lows on Friday, posting its best day in more than 2 months.
Only three stock sectors in Europe were in negative territory, while banks were among the biggest gainers with a surge of 2.7 percent. Banks generally benefit from expectations of rising interest rates. JPMorgan said they remained overweight on euro zone banks due to rising government bond yields, but remained bearish on global cyclical plays like autos and capital goods despite their recent poor performance.
"The tightening in monetary conditions could pressure valuation multiples near term," JPMorgan strategist Mislav Matejka said, noting that given the stronger euro, domestic plays should be favoured over export oriented stocks. The banking sector index was buoyed by BPER Banca, Bankia and Commerzbank, which all gained more than 4 percent. Carige, up nearly 4 percent, was one of the biggest gainers in Italy on the day its board held a crucial meeting to discuss capital plans for the troubled regional lender.
The oil & gas index, the worst sectoral performer in Europe so far this year, rose nearly 2 percent as the first fall in US drilling activity in a month buoyed oil markets. Shares in oil majors BP and Total rose 1.9 and 2 percent respectively. JPMorgan said energy and mining stocks should be supported by a weaker US dollar. Gains in oil prices also helped boost basic resources firms, which jumped 3.2 percent with Glencore rising 5 percent.
Nets rose around 11 percent to its highest in more than one year after the payment services provider said it was reviewing options after being approached by potential buyers. Analysts at Nordea said the Danish firm could be an attractive target for "several peers", naming credit card giants Mastercard and Visa as potential bidders. Provident Financial was a weak spot in Europe after Liberum analysts said another profit warning for its Home Credit division was likely.
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