LONDON (Reuters) – European shares edged up on Friday, buoyed by a bounce on Wall Street as a turbulent week drew to a close and investors licked their wounds after the region’s benchmark STOXX 600 sank to its lowest level since U.S. President Donald Trump’s election.
The STOXX 600 rose 1.4 percent by 0930 GMT with Germany’s DAX .GDAXI advancing 1.5 percent. The pan-European benchmark touched a low of 327.34 points on Thursday, its worst since Nov. 9, 2016.
Volumes remained very light with many investors away for the Christmas holidays. Just 5 percent of the 30-day average daily volume was traded in the first 30 minutes, usually the busiest.
Christmas week has been a wild ride for investors, with U.S. and European stocks suffering significant losses on Dec. 24, but Wall Street’s recovery rally on Thursday to gains of more than 1 percent helped lift sentiment in Asia and Europe.
“Suddenly every American investor has found a reason to be drawing parallels with 2007 and 2009. I don’t think the U.S. is in quite that big a hole, but it doesn’t look that attractive at the margin,” said Chris Bailey, strategist at Raymond James.
Threats continued to lurk with a U.S. government shutdown ongoing after a brief session of Congress on Thursday afternoon took no steps toward ending it.
“It sounds increasingly contrarian but my feeling is that, particularly if we get the transmission mechanism of a lower dollar, stocks outside the U.S. are set up for a good 2019,” said Bailey.
The oil sector was a big boost in early deals on Friday as crude prices recovered some of their lost ground. Europe’s oil and gas index .SXEP jumped 1.6 percent.
Aker BP (AKER.OL), Subsea 7 (SUBC.OL), TechnipFMC (FTI.PA), and Premier Oil (PMO.L) all gained 3.3 to 5.8 percent.
Technology stocks were the best-performing with the sector .SX8P up 1.9 percent. Chipmaker AMS topped the STOXX with a 6 percent leap, Wirecard led the DAX with a 3.6 percent gain and Logitech rose 3.7 percent.
Tech has been one of the worst-hit parts of the market as investors grew scared that waning economic growth and a U.S.-China trade war would suck the momentum out of high-growth companies.
Banks also rallied with UBS (UBSG.S) up 3.4 percent and Commerzbank (CBKG.DE) up 4.2 percent. The STOXX 600 banks index hit its lowest point since August 2016 on Thursday.
The most notable mover in illiquid trading was UK inkjet printer technology maker Xaar (XAR.L), whose shares fell 15.8 percent to their lowest in more than eight years after a profit warning. [nL3N1YX25V]
Overall, analysts expect earnings from companies in Europe’s STOXX 600 to grow 8.4 percent in 2019, the latest Refinitiv IBES estimates show. That’s more than the 7.6 percent earnings growth expected for the S&P 500 .SPX.
“My feeling is corporate earnings in Europe will surprise a few people in 2019,” said Bailey. “Earnings growth of 8.5 percent is more credible for Europe than for the S&P 500, which is a regime shift.”
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