European stocks inch towards record high as PMIs, chip rally support

European stocks kicked off the new quarter with gains on Thursday, as optimism around a new U.S. government spending plan and strong factory activity data out of the euro zone eclipsed concerns about another lockdown in France. The pan-European STOXX 600 index rose 0.5%, hovering just 2 points below its all-time high.

European stocks kicked off the new quarter with gains on Thursday, as optimism around a new U.S. government spending plan and strong factory activity data out of the euro zone eclipsed concerns about another lockdown in France.

The pan-European STOXX 600 index rose 0.5%, hovering just 2 points below its all-time high. The benchmark ended the first quarter with a 7.7% rise - its fourth straight quarter of gains. The German DAX climbed 0.6% to hit a record high, while the UK's FTSE 100 also gained 0.6%.

Despite slow vaccination programmes and a fresh pandemic wave hitting several countries, European markets have recovered almost all of their pandemic-driven losses on strong manufacturing activity and a bounceback in economy-linked stocks such as banks and energy. Data showed euro zone factory activity growth galloped at its fastest pace in the near 24-year history of a leading business survey in March.

"We remain optimistic on the recovery and believe current vaccine delays in the EU are unlikely to jeopardise the rebound in growth: the supply of vaccines is set to improve significantly in 2Q/3Q," analysts at Equita wrote in a note. Helping global sentiment further, U.S. President Joe Biden unveiled a sweeping $2.3 trillion spending plan on Wednesday that includes investments in roads, railways, broadband, clean energy and semiconductor manufacture.

Chip stocks including those of ASML, ASMI , Infineon Technologies BE Semiconductor all rose between 1.2% and 4% after U.S. chipmaker Micron Technology issued an upbeat revenue forecast. Also boosting the sector, contract chipmaker TSMC said it plans to invest $100 billion over the next three years to increase capacity at its plants.

British food delivery firm Deliveroo's shares inched down 0.8% after plunging by as much as 30% in their trading debut on Wednesday. German peer Delivery Hero jumped 3.4% after Dutch tech investment company Prosus NV raised its stake in the company.

France's blue-chip CAC 40 lagged after the latest lockdown announcement. Catering companies Sodexo and Elior slipped even as Sodexo forecast an expansion of second-half revenue after reporting a large beat on its first-half profit margin.

Swiss lender Credit Suisse rose 2.5%, but was on track for its worst week since March 2020, hit by worries about the fallout from Archegos Capital's dramatic meltdown.