European stocks rise from three-year low

A rebound in banks helped lift European stocks from their lowest levels since 2013, trimming a second weekly decline.

Commerzbank jumped 18%, the most since 2009, after saying it returned to profit. That eased concerns that the region’s lenders will fail to find a way to remain profitable in a low-rate environment, which sent them to their biggest plunge since August 2011 on Thursday. Deutsche Bank climbed 12% after saying it will buy back about $5.4bn of bonds. Energy producers and miners also surged with a rise in commodities.

The Stoxx Europe 600 Index rose 2.9%. Germany led the euro area’s growth to 0.3% in the fourth quarter, matching economists’ forecasts. With yesterday’s rally, the benchmark equity gauge pared its weekly drop to 4.1% as the volume of shares changing hands was about a fifth greater than the 30-day average.

“Markets have been scrabbling for a story — we’ve changed our focus on fears about China, oil, financials, and central banks in such a short time,” said Ben Kumar, an investment manager at Seven Investment Management in London. His firm oversees about $13bn.

“It’s crazy that the market is priced for recession and a complete failure of the financial system. But you wouldn’t want to call it the end of the rout quite yet. Nobody wants to be the first bull now.”

European equities have been among the most hurt during the rout that erased about $8.6trn from stocks worldwide this year alone. The Stoxx 600 closed on Thursday 27% below its April record, taking its valuation to 13.5 times estimated earnings from more than 17 at its peak.

Among 93 global equity gauges tracked by Bloomberg, five of the 10 worst performing were from Europe, with Germany’s Dax Index down 19% in 2016 and Italy’s Ftse MIB Index falling 26%.

A gauge of stock volatility for the region jumped 19% this week and reached its highest level since August.

With a 29% plunge this year through Thursday, Stoxx 600 banks have suffered the most amid growing concerns over the impact of low rates, bad loans at Italian lenders, and Deutsche Bank’s ability to repay debt obligations.

Credit Suisse Group joined the German lender and counterparts in Greece and Italy in trading at or near record lows, while Britain’s Standard Chartered tumbled to its lowest price since 1998. The group rebounded 5.5% yesterday, with all three firms rising more than 6%. Italy’s Banca Monte dei Paschi di Siena was one of the few to fall, extending its record low by 5.2%, after MSCI removed it from its index of Italian shares.

L’Oreal added 2.4% after sales growth at the world’s largest cosmetics maker beat projections. Rolls-Royce rallied 14% as its restructuring efforts enabled it to maintain its earnings projection despite a dividend cut.