European stocks advanced Tuesday, with gains for financial shares reflecting rise in benchmark yields in government bonds in line with an improvement for perceived riskier assets such as equities among investors.
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP +0.41% picked up 0.5% to close at 381.42, scoring a fifth straight day of wins. That marks the longest winning streak for the pan-European benchmark since April, according to FactSet data.
The benchmark on Monday surged 1%, the largest rise in four weeks, as concerns about Hurricane Irma and North Korea’s weapons program receded.
“Market sentiment continues to improve again as the key risk events that drove the safe haven flow at the end of last week continues to unwind, which has helped the dollar and equities higher,” said Richard Perry, market analyst at Hantec Markets.
“With the destruction of Hurricane Irma not as bad as feared and Kim Jong Un opting simply for a [Foundation Day] party that did not go off with a bang, there has been a significant retracement of some of the huge declines on Treasury yields,” said Perry.
Investors world-wide had sought refuge from risks in bonds. But as that is reversing, prices are declining and yields are moving higher, which bodes well for interest-rate sensitive banks. The Stoxx Europe 600 Bank Index /zigman2/quotes/210599339/delayed XX:SX7P +0.79% ended up 1.7% on Tuesday, its biggest one-day percentage gain since early July. Meanwhile, the yield for benchmark 10-year German bonds /zigman2/quotes/211347112/realtime BX:TMBMKDE-10Y 0.00% , for example, were up 0.400%, compared with 0.349% late Friday in New York. Bond prices and yields move inversely.
Shares of Deutsche Bank /zigman2/quotes/205584254/delayed DE:DBK +0.84% /zigman2/quotes/203042512/composite DB -0.09% popped up 3.6%, Commerzbank AG /zigman2/quotes/200193353/delayed DE:CBK +1.44% picked up 2.9% and Banco Santander SA /zigman2/quotes/205677933/delayed ES:SAN +1.54% moved up 0.9%.
As Irma’s wrath wasn’t as destructive as anticipated, the Stoxx Europe 600 Insurance Index /zigman2/quotes/210599350/delayed XX:SXIP -0.48% rose 0.8%. AXA SA /zigman2/quotes/202169431/delayed FR:CS -0.28% climbed 1.2% and Swiss Re AG /zigman2/quotes/203711779/delayed CH:SREN -0.43% tacked on 1%.
Stock movers: Ashtead Group PLC /zigman2/quotes/200232063/delayed UK:AHT -0.38% jumped 4.5%, to become the strongest performer on the FTSE 100. The equipment rental company posted a 29% rise in pretax profit and said Hurricanes Harvey and Irma may bolster demand.
Whitbread PLC /zigman2/quotes/207954631/delayed UK:WTB -0.97% fell 0.4% after Citigroup downgraded its rating to sell from buy, saying it’s “cautious on European hotels.” Whitbread runs the Premier Inn hotel chain.
Indexes: Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX +0.37% rose 0.4% to end at 12,524.77 and France’s CAC 30 index /zigman2/quotes/210597958/delayed FR:PX1 +0.56% rose 0.6% to 5,209.01.
But the FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.07% flipped lower, losing 0.2% at 7,400.69. The move came as the pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.3294% jumped following U.K. inflation data that was stronger than expected. Inflation rose to 2.9% in August year-over-year, more than a FactSet estimate of 2.8%. Sterling bought $1.3276, up from $1.3160 late Monday in New York.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.4113% traded at $1.1963, little changed from $1.1953 late Monday in New York.
In other developments Tuesday, Swedish inflation rose to 2.3% in August. Analysts polled by FactSet had expected a 2.2% reading.