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Rally in basic resources stocks boosts European indices

Published 22/11/2016, 09:24 pm
© Reuters.  Rally in basic resources stocks boosts European indices
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(ADVISORY- Follow European and UK stock markets in real time on the Reuters Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets)

* STOXX Europe 600 index up 0.6 pct

* Mining shares among top gainers

* Rotork surges after guidance

By Atul Prakash

LONDON, Nov 22 (Reuters) - European mining shares rose 3 percent on Tuesday, underpinning Europe's benchmark STOXX 600 index as the global reflation trade in the wake of Donald Trump's victory in the U.S. presidential election continued.

The pan-European STOXX 600 index .STOXX was up 0.6 percent by 0924 GMT after climbing to its highest level since Nov. 10. The index extended the pervious day's gains of 0.25 percent and mirrored a rise on Wall Street.

All three major U.S. stock indexes set record closing highs on Monday. Small caps also advanced, pushing the Russell 2000 index .RUT to a record high close, with the session marking the first time all four indexes hit closing records on the same day since Dec. 31, 1999. .N

The European Basic Resources index .SXPP , which has now doubled from its January lows, was the best performing sector index. It was up 3 percent after prices of major industrial metals such as copper and aluminum increased.

"I am fairly bullish on miners and banks and have an 'overweight' recommendation on both the sectors. The focus of markets has shifted to the expected increase in infrastructure and defense expenditure in the United States," Christian Stocker, strategist at UniCredit in Munich, said.

"As a result of such 'reflation expectations', long-term bond yields have been increasing and industrial metals have been rallying. The reallocation that has started in these sectors will continue."

Shares in Anglo American AAL.L , BHP Billiton BLT.L , Glencore GLEN.L , Rio Tinto RIO.L and Antofagasta ANTO.L advanced 3.4 to 5.2 percent.

The STOXX Europe 600 Oil and Gas index .SXEP was up 1.3 percent, while European banks .SX7P rose 1 percent.

European shares slumped in a knee-jerk reaction after results showed in early November that Trump had won the U.S. presidential election. However, the market rebounded the same day and has gained 4.5 percent from an intra-day low on Nov. 9.

Equities were boosted by Trump's election promises to increase investment in infrastructure projects and work on a fiscal stimulus programme. However, the lack of policy details have prompted investors to stay cautious.

"Political uncertainty in the United States has diminished substantially even though we do not know the shape of Trump's policies and government appointments yet," Lorne Baring, managing director of B Capital Wealth Management, said.

"The market is reacting to the better political environment and, bar the Italian referendum which will probably be another source of concern, there is a sigh of relief that the year's turbulent and somewhat surprising politics are behind us."

Italy's Prime Minister Matteo Renzi has said he could resign if he loses the Dec. 4 referendum on constitutional reforms.

Elsewhere, Rotork shares ROR.L surged more than 11 percent after the Valve maker said it expected its revenues coming towards the top end of market expectations. GEN.CO rose 3 percent after the company received U.S. approval for a drug, while Essilor ESSI.PA shares, down 6.8 percent, were poised for their worst day in eight years after the firm cut its outlook. by Andrew Heavens)

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