European stocks ended the first quarter near record highs.
European stocks traded marginally below all-time highs on March 31, the last trading day of the year’s first quarter. The pan-European STOXX 600 index ended March with a 6.5% rise and the first quarter with an 8.1% gain. It was the fourth straight quarterly advance for the index.
European stocks enter April, historically the best month for returns, with the Stoxx 600 within 1% of a record high.
March was the Stoxx 600’s best monthly performance since November 2020. Bets on a vaccine-fueled economic recovery have sent cyclicals surging in the first three months of 2021, with automotive, banks and travel and leisure shares up around 20%.
Europe’s heavy exposure to cheap and cyclical sectors is considered a positive given rising bond yields and inflation expectations, especially after the U.S. Federal Reserve pledged recently to remain supportive.
Forecasters such as Deutsche Bank say that global growth prospects and higher cyclicality mean Europe is the place to invest in 2021. The bank has a year-end target on the Stoxx 600 index of 465, implying a 10% gain for the entire year.
The Stoxx 600 travel and leisure index is already up 21% year-to-date and trades at a record high even as a lot of uncertainties remain about the coming summer holiday season.
