European stocks set for strong finish to week, banks sizzle after ECB

European shares resumed their rally on Friday as a bumper stimulus from the European Central Bank fuelled hopes of a faster economic recovery, putting the main benchmarks on course for their best week in two months.

The pan-European STOXX 600 gained 1.3%, led by a 3.3% jump in bank stocks, while insurers, automakers and travel stocks gained nearly 3%. Global equity markets have climbed strongly this week, with Wall Street indexes nearing record levels as investors focussed on re-opening of economies, progress in development of a COVID-19 vaccine and stimulus actions.

Europe's STOXX 600 is about 15% below all-time highs, but has recovered more than 37% from its March lows, with investors moving into more economically sensitive cyclical sectors. The benchmark index is on course to post a 5.9% gain this week, its best showing since April 10.

The euro zone banks index climbed 4.1%, led by Spanish banks, benefiting from gains on their sovereign bond holdings. Investors have warmed up to peripheral euro zone debt this week after Thursday's bigger-than-expected expansion of ECB's pandemic-linked stimulus package. Shares in Banco de Sabadell jumped 7.9%, while France's Societe Generale and Germany's Commerzbank gained 7% and 6.4%.

"Much pessimism remains priced into eurozone financial assets but the ECB continues to provide a material level of support," said Raymond James' European strategist Chris Bailey. "Signs of recent eurozone government coordination efforts can only help positively augment this." British Airways owner-IAG topped gains on the STOXX 600 with a 11% jump, while shares in easyJet, Lufthansa and Air France gained between 3% and 6.2%.

Airbus gained 6.6% after Australia's Qantas announced plans to reactivate plans to order airplanes. German fashion house Hugo Boss jumped 6.9% after it confirmed ongoing talks for a new chief executive officer with Daniel Grieder, former head of Tommy Hilfiger Global & PVH Europe.

German property group Deutsche Wohnen gained 2.3% after a report of its entry into the blue-chip DAX index to replace Lufthansa.

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