Banks Push Euro Stocks Sharply Higher
European stocks staged a sharp rally on Thursday as a solid outlook from bellwether Nokia and surprisingly strong results from JPMorgan spurred a relief rally led by the banking sector.
The FTSEurofirst 300 index closed 2.7 percent higher at 1,145.87 points, after brushing an intra-day high of 1,154.72 earlier in the session. The day's advance was the largest since April 1.
Yet analysts and strategists were uncertain whether Thursday's rally marked a significant turnaround.
"The banks have fallen so much recently that you have to wonder whether they are overdone," strategist Bernard McAlinden at NCB Stockbrokers in Dublin said.
"The interesting thing is that if you look at U.S. banks during the past 30 to 35 years then banks are now as low as they have been," he added, noting: "This may be a very advanced long-term clue that the worst may be over."
Banks rebounded from early in the session with the DJ Stoxx European banks index soaring 5.4 percent, supported by unexpectedly strong results from JPMorgan .
UBS rose 7.9 percent, Deutsche Bank gained 6.9 percent and BNP Paribas was up 6.1 percent.
Tech stocks were also in the spotlight after Finnish handset maker Nokia raised its outlook, although analysts agreed that the rest of the bellwether's earnings report showed a mixed picture.
The average selling price (ASP) for handsets was below forecasts and earnings per share were disappointing.
"It's normally very negative when ASP and margins fall short of expectations, but sentiment was so negative that it is now enough for them to say that the market is growing," analyst Nicolas von Stackelberg at Sal Oppenheim said.
The stock added almost 8 percent, with peers Ericsson and Alcatel-Lucent rising 6.2 and 1.9 percent respectively.
Ericsson will be in focus on Friday when its joint venture with Sony reports.
Nokia's outlook also led to a rally in supplier semiconductor stocks such as Infineon, up 9.6 percent and ARM Holdings, up 14.3 percent.
The tech sector as a whole clocked up 5.5 percent.
Whether or not the rebound in the broader equity market represents the beginning of a significant turnaround was a hot topic through the session, with Goldman Sachs declaring it believes the "market is within 5 percent of fair value." NCB's McAlinden added the level of crude oil is set to remain in the spotlight.
"A lot depends on oil. If it comes back down below $130 than it is more than a short-term rally," he said, adding: "It was the oil price that rudely interrupted the rally in March."
Crude held above $136 a barrel during the session, yet was well off recent highs.
Heavyweights BP, Shell and Total rose between 0.8 and 2 percent.
Other notable gainers included Union Fenosa, up 16 percent after construction group ACS confirmed it is considering the sale of its 45.3 percent stake in the Spanish utility.
Any buyer of the stake would be obliged to make a full bid for Fenosa.
Decliners included Essilor, which shed 8.4 percent after the French maker of eyeware disappointed investors with weak second-quarter sales.
Pharmaceuticals and other healthcare stocks took a breather from recent gains and Fresenius Medical Care retreated 4.6 percent, after its parent company Fresenius SE said it will issue a bond worth up to 600 million euros exchangeable into FMC shares, which will reduce its holding to around 30 from 36 percent.