China data, banks lift European stocks after last week’s sell-off

By Sruthi Shankar

(Reuters) – European stocks partially recovered from last week’s hefty losses on Monday, helped by upbeat industrial profits data from China and as banking stocks bounced off record lows.

The pan-European STOXX 600 index <.STOXX> rose 1.7% after last week’s 3.6% drop, with the banks index <.SX7P> jumping 4.1%.

HSBC Holdings surged 9.2% after Chinese insurance group Ping An <601318.SS> <2318.HK>, the biggest shareholder in the British lender, boosted its stake to 8.00% from 7.95%.

Commerzbank rose 5% after it named a top manager at rival Deutsche Bank Manfred Knof to lead the bank, which has been in turmoil following the sudden resignation of its CEO in early July. The stock move was in line with the broader sector.

Investors have shunned Europe’s banking sector hit by a cocktail of lower global borrowing costs, rising bad loans due to the economic downturn and a dirty money scandal that made it the worst performer this year with a 43% decline.

“There’s a chance for tactical rebalancing, but not a structural rally in banks,” said Dhaval Joshi, European investment strategist at BCA Research.

Investors have been wary about a second wave of coronavirus infections stalling a nascent European economic recovery, sparking a bout of sell-offs this month in stocks. The British government is mulling tougher restrictions, possibly outlawing more inter-household socialising, a junior health minister said.

Concerns related to the COVID-19 pandemic took a back seat on Monday, with markets taking comfort from data that showed profits at China’s industrial firms grew for the fourth straight month in August, buoyed in part by a rebound in commodity prices and equipment manufacturing.

Trade-sensitive German stocks <.GDAXI> rose 2.4%, while Europe’s auto <.SXAP> and industrial sectors <.SXNP>, heavily reliant on Chinese demand, rose more than 2%.

ArcelorMittal SA gained 4.8% after Cleveland-Cliffs Inc agreed to buy the U.S. assets of the steelmaker for about $1.4 billion.

Sonova Holding AG , the world’s biggest hearing aid maker, surged 12.5% as it expects revenue to return to growth in the next six months.

London-based spirits maker Diageo rose 5.9% after saying it had made a strong start to its fiscal year 2021, with its U.S. business performing ahead of expectations.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta)