European shares hover near record peak as banks, retail stocks gain

European shares rose for a third straight session in thin holiday trading on Wednesday, hovering near an all-time high hit last month, supported by gains in banks and retail stocks.

The pan-European STOXX 600 added 0.3% to 489.61, a hair’s breadth away from a record high of 490.58 hit in mid-November.

Retail stocks were the biggest gainers, while defensive sectors such as healthcare and industrial stocks rose 0.3% and 0.4%, respectively.

France’s CAC 40 was flat, falling from a record high on Tuesday, as the country’s new coronavirus cases in a 24-hour period hit a record high of 179,807 on Tuesday.

“Europe’s restrictions will have a tail impact, but for now, markets are overwhelmingly pricing in the (Omicron) variant as a milder incarnation, despite its easier contractibility,” said Jeffrey Halley, senior market analyst at OANDA.

Britain’s FTSE 100 jumped 1.1% on higher oil prices and slim prospects of lockdowns in the country till the year-end.

“With market activity reduced for the holiday season, investors continue to tentatively price in a global recovery hitting a minor bump, and not a pothole,” Halley added.

Fears of hawkish central bank moves and tapering have sent equities into a tailspin several times this year. But the STOXX 600 has largely had a bull run in 2021 thanks to accommodative monetary policy and stimulus measures, with tech and financial stocks seeing the highest gains.

However, analysts have mixed views going into 2022 as inflation fears, COVID-19 risks and an energy crunch persist. Many believe inflation running hot will pressure central banks to exit from policy accommodation sooner than expected.

Spain’s IBEX rose 1%, a day after its parliament approved a 2022 budget and a major spending plan that could be one of the largest in the country’s history.

Deutsche Bank fell 0.3% after the German financial regulator said it had fined the bank about $10 million for controls related to the Euro Interbank Offered Rate, a setback for the nation’s largest lender in its attempts to restore its reputation.

BPER Banca added 1.7% after agreeing to hire 550 new staff and make 300 temporary contracts permanent on top of 1,700 exits that Italy’s fifth-largest bank already announced in September. (Reporting by Anisha Sircar in Bengaluru; Editing by Devika Syamnath and Ramakrishnan M.)