Real estate stocks lead European shares to biggest weekly gain since March

By Ankika Biswas and Bansari Mayur Kamdar

(Reuters) -Europe’s benchmark index posted its biggest weekly gain since March on Friday, supported by interest rate-sensitive real estate stocks as signs of an end to monetary policy tightening by major central banks boosted sentiment

The pan-European index inched 0.2% higher, also lifted by upbeat earnings, signs of slowing inflation and falling euro area sovereign bond yields on increased bets of rate cuts in 2024. The index added 3.4% over the week.

Decisions by the Federal Reserve, the Bank of England, the European Central Bank and others to leave policy unchanged have underpinned investor hopes that interest rates have peaked.

“There’s a cautious optimism that it’s the end of rate hikes, but that narrative is premature because we need to see how the data is coming up,” said Giles Coghlan, chief market analyst at GCFX Ltd.

It all depends on the inflation trajectory, Coghlan added.

ECB board member Isabel Schnabel noted the central bank is on track to push inflation back down to 2% by 2025 but the “last mile” of disinflation may be the toughest, so the bank cannot yet close the door on further rate hikes.

Real estate stocks saw their biggest weekly gain since at least 2008, adding 12.2%, as a rally in government bonds brings down yields in Europe and around the world.

Automobile stocks rose 1.7% for a 6.2% weekly gain.

BMW (ETR:) advanced 2.0% on higher margins in its automotive segment in the third quarter, and Volvo (OTC:) Cars jumped 3.7% after its October sales update.

Nexi (BIT:) rose 6.1% on a report saying U.S. private equity firm Silverlake is considering buying the Italian digital payment firm.

Andritz gained 6.2% after JPMorgan upgraded the Austrian industrial equipment maker to “overweight” from “neutral”, citing a strong backlog that gives visibility on next year.

Kering (EPA:) rose 2.9% after Deutsche Bank upgraded the French luxury group to “buy” from “hold”, saying its top brand Gucci was “significantly underappreciated” in the brokerage’s view.

Other luxury giants LVMH and Richemont also rose, with the sector posting its strongest weekly showing since July.

The day’s worst performer was shipping group A.P. Moller-Maersk which slumped 16.9% after it indicated revenue and operating profit would land at the lower end of guidance and announced a review of its buyback program.

Energy stocks fell 2.2%, tracking a slide in oil prices as supply concerns driven by Middle East tensions eased.

Energy is the only European sector to end the week lower.

Insurance stocks slipped 0.4%, led by a 1.2% decline in France’s AXA following its nine-month results.