Europe close: Stocks bounce back led by defensive issues

European stocks rose on Friday, bouncing back from the Fed-fuelled losses of the previous session, led by gains in defensive issues such as health care stocks.

The benchmark DJ Stoxx Europe 600 index gained 1.23% or 4.10 points to 338.01 and France’s CAC 40 advanced 1.67% or 71.36 points to 4,353.90, while Germany’s DAX was 1.23% firmer.

The DJ Stoxx 600 healthcare sector sub-index advanced 1.78% or 12.58 points to 718.32.

Defensive stocks are expensive on some metrics after having outperformed the market by a wide margin since the 2007, yet in comparison to other defensive assets they still looked cheap, Citi analysts led by Robert Buckland said in a research note sent to clients.

Citi’s index of defensive shares was sporting a dividend yield of 2.7% at the time of writing, in comparison to 0.8% for global bonds, he went on to explain.

At the same time, oil prices were a little higher in choppy trade amid political instability in Nigeria, where the country’s petroleum installations are being attacked.

West Texas Intermediate crude oil futures slipped 0.144% to $48.60 a barrel on the ICE and Brent crude was just 0.02% lower at $48.80.

“Traders are looking to unwind many of their positions as we close out the week, with the notable trends that have dominated the markets this week coming under pressure. Hesitancy within the recent US dollar strength and a reversal of yesterday’s stock market weakness sees markets likely to finish the week at less extreme levels,” said Joshua Mahony at IG.

“Ultimately, the fact is that while a June hike is increasingly credible, it is still the least likely of their two options. With huge economic implications to the Brexit vote, it is unlikely we will see any action from the Fed next month.”

On Thursday, stocks in the US and Europe lost ground as investors digested hawkish minutes from the Federal Reserve and comments by New York Fed President William Dudley and Fed Reserve Bank of Richmond President Jeffrey Lacker.

Basic resources – which were hit hard on Thursday as the dollar rose on Fed rate-hike expectations – managed to recoup a part of the previous day’s losses. The Stoxx 600 sub-index for the sector pushed up 0.72%.

In corporate news, Unicredit rallied on press reports the Italian lender is reviewing a plan to sell assets to boost its capital base.

Novartis gained 1.8% after receiving backing from the UK for one of its cancer treatments.

Babcock edged higher after announcing that its joint venture with Lockheed Martin, Ascent Flight Training, has been awarded a contract by the Ministry of Defence to deliver the rotary wing element of the UK Military Flying Training System.

Bookie Ladbrokes surged in London after the competition watchdog said it and Gala Coral may have to close up to 400 shops if the merger between the two is to go ahead. The number was lower than expected and investors were relieved the merger would be able to proceed.

On the downside, Cartier owner Richemont was under the cosh after it posted an increase in full-year profit but warned of a challenging outlook.