London: European equities climbed on Wednesday and were on track to record their best quarter in nearly 10 years, with encouraging macro-economic figures and positive market sentiment boosting financial and mining shares.
The FTSEurofirst 300 index of top European shares was up 0.5% at 1,007.03 points at 4:18pm. It has risen 21% this year, 56% from a record low in March and 18.4% in the July-September period - its best quarter in almost a decade.
Financials were among top gainers, with Barclays, Lloyds, Royal Bank of Scotland, Credit Agricole and Natixis adding 0.3-2.3%.
“You have got compelling evidence about the improving macro position, you have got an expectation that corporate earnings will bounce back by 25% next year and brokers are becoming more optimistic - that’s a pretty powerful mix of positivity,” said Barclays Stockbrokers strategist Henk Potts.
“The next big hurdle for the market to overcome could be the third quarter reporting season. If it is as supportive as the second quarter was and allows brokers to continue to be aggressive in terms of their upgrades, then certainly we have potential to add to this (rally),” he added.
The market was also supported by positive data. British consumer morale enjoyed its biggest monthly boost in more than 14 years in September as people grew more optimistic about the economic outlook than at any time in the past decade, the GfK/NOP consumer confidence survey showed.
Figures also showed manufacturing activity powered ahead in China and Japan in September, boosted by new orders from their home markets and abroad.
Miners took strength from higher metals prices, with copper surging 3.1%, nickel up 3% and aluminium rising 1.8%. BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and ENRC rose 0.1-2.3%.
The positive market outlook prompted investors to grab riskier assets such as equities, while the dollar came under pressure.
The VDAX-NEW volatility index was down 2.4% after hitting a one-week low. The lower the index, which is based on sell and buy options on Frankfurt’s top-30 stocks, the higher is investors’ appetite for risky assets.
But some analysts advised caution.
“We’re coming to the end of a very strong quarter and there is some marking up still going on,” said Philippe Gijsels, senior equity strategist at Fortis Bank in Brussels.
“People are saying ‘we’ve made a nice profit, let’s not spoil it´ but I think there’s massive room for disappointment.”
Insurers were also up, with consolidation talk boosting the sector. Old Mutual, Prudential Swiss Life and ING Groep added 0.3 to 3.2%.
Legal & General topped the sector, up 5.4%, boosted by an upgrade to “hold” from “sell” by Deutsche Bank as well as ongoing speculation it might be the target of a bid from Resolution, which fell 1.6%.
Man Group, the world’s largest listed hedge fund firm, jumped 5.7% after it said slowing outflows helped lift assets to an estimated $43.8 billion at end-September, at the top end of forecasts.
Smiths Group rose 5.1% after the technology company reported full-year results showing a 21 percent fall in underlying full-year results, which analysts said were better than feared.
But British retailer Marks & Spencer was down 2.1%. It upgraded its forecast for full-year profit margin and posted an improvement in its quarterly sales trend, but said its costs were rising and warned it would be 2011 before the economy fully recovered.
Across Europe, Germany’s DAX, France’s CAC and Britain’s FTSE 100 were up 0.1 to 0.5%.