European shares rise as banks gain on US stress tests, upbeat EU data

European shares are higher Friday as investor sentiment is supported by a positive US stress test result and a better-than-expected preliminary euro zone PMI.

European shares rise as banks gain on US stress tests, upbeat EU data

European shares are trading higher Friday as the banks are buoyed by positive results so far with regards to the US Federal Reserve’s Stress tests. Investors are also upbeat on stronger than expected euro zone economic data.

By 1440 BST, the EUROSTOX 600 was 0.75% higher, while the EUROSTOXX 50 had gained 0.69%. Regional bourses were also positive. The German DAX was up 0.20%, the French CAC was 0.94% in positive territory and the Spanish IBEX was 0.62% in the green.

US stress test results boost financials

The 35 largest US banks passed the US Federal Reserve stress tests, showing they have enough money available to cope with a severe financial crisis.

Stress tests have been introduced since the 2008 global financial crisis as a way of assessing the health of the financial sector should another similar shock arise.

European banking stocks made gains on the results:

  • Deutsche Bank shares rose 1.19% to €9.49.
  • Banco Santander shares were 1.56% higher at €4.75.
  • UBI Banca shares moved 2.48% into the green to €3.35.
  • Barclays banks shares were up 1.77% at £193.56.

Sentiment supported by PMI data

Earlier Friday, IHS Markit published its preliminary euro zone PMI data showing that Europe’s private sector performed better than expected.

IHS Markit said that the euro zone’s preliminary composite PMI -which measures activity across both the manufacturing and services sectors - rose to 54.8 in June from May’s disappointing 54.1.

“An improved service sector performance helped offset an increasing drag from the manufacturing sector in June, lifting Eurozone growth off the 18-month low seen in May,” said IHS Markit’s chief business economist, Chris Williamson.

“With growth kicking higher in June, the surveys are commensurate with GDP rising 0.5% in the second quarter,” he added.

Elsewhere, Airbus shares were also higher Friday after the European plane maker shared its updated Brexit assessment. It said that were the UK to Brexit without deal in place then it would prove a negative development for Airbus and the broader UK aerospace industry.

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