European stocks extended their rebound from last week, led by gains in miners, as U.K. equities climbed amid a weakening pound.
The Stoxx Europe 600 Index advanced 1.3 percent at 9:44 a.m. in London. Gains in commodities pushed Anglo American Plc, BHP Billiton Ltd. and Rio Tinto Group up more than 5.5 percent, leading gains in the FTSE 100 Index. The gauge is also benefiting from a weakening pound after the mayor of London said he’ll campaign for Britain to leave the European Union.
“While we still have some pretty big risks out there, the market has sold off so much it was about time we got a bounce back,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “We’ve seen a turnaround in the commodities sector. Some of the drag from China is also starting to ease. We have a bit further to go in this relief rally.”
The Stoxx 600 jumped the most in a year last week, taking its gains from a Feb. 11 low to 7.5 percent. The gauge was still down 11 percent this year through Friday, with a valuation of about 14 times estimated earnings, compared with a high of 17 last April. Italian and Greek equities, among the most hurt in 2016 amid a tumble in their banks, were the biggest gainers in western Europe on Monday.
In the U.K., the FTSE 100 added 1.2 percent on Monday. The gauge this year is the best performer among major national measures in western Europe, helped by a weakening pound and rebound in miners.
Prime Minister David Cameron last week negotiated new terms for Britain’s membership in the EU, and a referendum will be held on June 23, where voters will chose whether to exit or stay in the 28-nation bloc. Both London Mayor Boris Johnson and Justice Secretary Michael Gove said they’ll campaign for the country to leave.
While JPMorgan Chase & Co. says an exit would be “quite negative” for the market, it doesn’t expect it to leave. The bank just turned overweight British equities after being underweight for three years, citing attractive valuations and a lower commodity exposure.
Among stocks moving on corporate news, Associated British Foods Plc added 1.7 percent after the owner of discount-clothing retailer Primark and Kingsmill bread raised its annual profit outlook. UCB SA climbed 2 percent after saying an experimental drug it’s developing with Amgen Inc. reduced the frequency of new spinal fractures in post-menopausal women with osteoporosis. Home Retail Group Plc jumped 12 percent after Steinhoff International Holdings Ltd. offered 1.4 billion-pounds ($2 billion) to buy it, countering a bid by J Sainsbury Plc. Sainsbury dropped 2 percent.
HSBC Holdings Plc slid 4.3 percent after posting a quarterly loss, hurt by a decline in income from lending, higher loan-impairment charges and fair-value losses on its debt.
Banks in Europe have been particularly hit this year, falling 23 percent as a group through Friday, on concern about bad loans, creditworthiness and the impact of low interest rates on profits. Deutsche Bank AG, Credit Suisse Group AG and Italy’s Banca Monte dei Paschi di Siena SpA are among those that dropped to records this month.