European stocks advanced after their worst week since August as investors considered the European Central Bank-induced slide overdone.
The Stoxx Europe 600 Index closed 0.5 percent higher, its biggest increase since Nov. 26. The equity benchmark pared earlier gains of as much as 1.6 percent as a slide in oil prices dragged energy companies lower. Germany’s DAX Index posted the best performance among western-European markets as carmakers jumped, recouping 1.3 percent after last week’s 4.8 percent slide. France’s CAC 40 Index added 0.9 percent.
The Stoxx 600 is up 9.8 percent from its September low, after having risen as much as 14 percent on Nov. 30 amid expectations for more ECB support and as investors accept the likelihood of higher U.S. interest rates. While last week’s ECB action disappointed, the subsequent selloff didn’t faze strategists from UBS Group AG to JPMorgan Chase & Co., who are among at least five banks keeping their bullish forecasts on European stocks amid lower valuations.
Disillusionment with ECB stimulus measures and the Organization of Petroleum Exporting Countries’ output strategy sent the Stoxx 600 down 3.4 percent last week, taking its valuation to about 16 times estimated earnings from as high as 16.5 on Nov. 30. That compares with about 17.7 times for the Standard & Poor’s 500 Index.
Better-than-expected jobs data that fueled a U.S. rally on Friday boosted investor optimism that the world’s biggest economy is strong enough to cope with higher borrowing costs. Traders are pricing in a 76 percent chance of a December liftoff.