European shares ended Monday's session close to six-week highs, helped by buoyant global stock markets, stronger financials and a rally in Portugal after the euro zone member regained investment grade rating. With no new actions by North Korea over the weekend, economic recovery continued to whet appetite for the region's equities and the pan-European STOXX index ended up 0.3 percent. Wall Street, in early trading, hit record highs.
Lisbon blue chips were the star performers after Standard & Poor's on Friday became the first of the big three credit ratings agencies to lift Portugal back to investment grade, citing its improving economy and public finances. Portugal's PSI 20 closed up 1.6 percent after reaching a two-months high during the day with shares in bank BCP Millennium rising 5.6 percent. Since the country lost its investment grade more than five years ago, its blue chip index has underperformed its peers.
Britain's FTSE 100 rebounded 0.5 percent on Monday, boosted by an easing pound and comments from Bank of England governor Mark Carney reiterating that the central bank would raise rates in the coming months but adding this would be done gradually. After being hit this summer by an unexpected surge in the euro, European stocks have regained ground thanks to signs of a pickup in economic growth which more than offset geopolitical and monetary policy uncertainty.
"The euro zone is in a very good spot currently, we believe, as it benefits from any rise in bond yields, and most of the near-term damage from a stronger euro is likely already absorbed," J.P Morgan strategists led by Mislav Matejka said. J.P Morgan has an overweight rating on euro zone stocks and expects financials like banks and insurance companies and cyclicals to outperform the market into the year end.
Europe's bank index contributed the most to lifting the overall index, with a 0.6 percent rise. Spain's Banco de Sabadell rose 1 percent and so did Italy's UniCredit. Among the biggest gainers on the STOXX were Telecom Italia, up 4.7 percent as speculation grew over how the Italian government plans to end its row with Vivendi, the biggest shareholder in the Italian firm. The French conglomerate ended down 0.4 percent.
Ryanair was a weak spot, down 1.8 percent following its announcement of plans to cancel between 40 and 50 flights per day until the end of October, disrupting hundreds of thousands of journeys. Outside of the STOXX, Fingerprint slumped 22.1 percent as it warned revenues would slump in the third quarter. Apple's new iPhone X includes hardware for facial recognition instead of a fingerprint sensor to unlock the phone, and some analysts say this is bad news for Fingerprint Cards.