European shares climbed to a three-week high on Thursday, boosted by auto and commodities-related stocks, with sentiment improving on expectations that the Bank of England (BoE) will cut interest rates later in the day to spur economic growth.
The pan-European STOXX Europe 600 and the FTSEurofirst 300 indexes were both up around 1 per cent in morning deals after rising earlier in the session to their highest since June 23 -- the date when Britons voted in a referendum on European Union membership.
The result the next day showed that the “Brexit” camp had won the referendum, resulting in a sharp sell-off in shares before the market started recovering partly on expectations of further stimulus from central banks.
Riskier assets were in demand before a policy meeting of the British central bank, which is widely expected to cut interest rates for the first time in more than seven years as it tries to cushion the economy from the Brexit vote.
“European shares have made up most of the lost ground after the Brexit shock. The main, if not only, reason for this is that they anticipate a strong policy response from central banks," said Philippe Gijsels, head of research at BNP Paribas Fortis in Brussels. “A rate cut by the BoE is almost a certainty.”
Miners were again in demand, with the STOXX Europe 600 Basic Resources index rising about 2 per cent, the top sectoral riser, tracking gains in industrial metals prices. The energy index was up 1.5 per cent as oil prices rose.
Anglo American, Rio Tinto and Glencore advanced 1.8 to 3.5 per cent.
The beaten-down banking sector continued its recent upward journey, with the European sector index rising around 2 per cent, helped by a 4.2 per cent rise in shares of Deutsche Bank and a 5.8 per cent rise in UniCredit.
However, the banking index is still down nearly 29 per cent, the worst performing sector this year, on concerns about lenders' underlying health and dwindling margins.
Automobile stocks, particularly sensitive to economic conditions, also featured among the top gainers, with the sector index rising 1.9 per cent on the back of a 2.1 to 3.3 per cent rise in the shares of BMW, Fiat and Daimler