European stocks kick off 2022 at record highs

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, December 29, 2021. REUTERS/Staff

Jan 3 (Reuters) – European shares hit all-time highs on Monday, starting the year in an upbeat mood on hopes of steady economic recovery despite a surge in COVID-19 cases due to the Omicron variant.

The pan-European STOXX 600 index (.STOXX) rose 0.6% to hit a record high of 490.76 points in morning trade, surpassing its November peak of 490.58.

The benchmark recorded a 22.4% jump in 2021, its second-best yearly performance since 2009, as steady economic stimulus, earnings growth and vaccine rollouts made investors pour money into the stock markets.

“Although COVID-19 variants permeated the global economy, 2021 was the year of records with many bourses closing at or near record highs, while inflows into equities surpassed their largest accumulation ever ($928 billion),” Sean Darby, global equity strategist at Jefferies, said.

“Peering into 2022, we expect volatility to rise.”

Stock exchanges in Germany (.GDAXI), France (.FCHI), Italy (.FTMIB) and Spain (.IBEX) were up between 0.6% and 1%, while London markets (.FTSE) were closed.

Among sectors, automakers (.SXAP) led morning gains with a 1.6% rise, following monthly sales reports from several global automakers. read more

Banking stocks (.SX7P) gained 0.8%, tracking a rise in euro zone government bond yields. They were the best performing European sector in 2021, as a surge in inflation pushed traders to price in faster monetary policy tightening, particularly in the United States.

Lufthansa (LHAG.DE) jumped 4.9% after Citi upgraded the stock to “buy” from “sell”, as it expects the German airlines to benefit from reopening of Asia routes, particularly China.

Air France KLM (AIRF.PA) gained 3.9% as the brokerage upgraded the stock to “neutral”.

A survey showed factory activity in the euro zone remained resilient in December, as factories took advantage of supply chain issues easing and stocked up on raw materials at a record pace. read more

While coronavirus cases saw a rapid increase in several parts of the world, investors were largely relieved following signs that the Omicron variant is milder than the Delta variant. read more

Italian truckmaker Iveco Group slipped 4.8% in its first day of trading on the Milan bourse following its spin-off from CNH Industrial (CNHI.MI). read more

Reporting by Sruthi Shankar in Bengaluru; Editing by Sherry Jacob-Phillips and Shounak Dasgupta

Our Standards: The Thomson Reuters Trust Principles.