European stocks rise further on US economic optimism

London - European equities climbed, extending their biggest advance in six weeks, as optimism grew the U.S. economy is strong enough to withstand higher interest rates.

The Stoxx Europe 600 Index added 0.7% at 09:07, as all 19 industry groups gained. Carmakers, oil shares and banks posted the biggest gains. Europe’s benchmark jumped 2.2% yesterday after better-than-forecast US housing data signaled economic strength before a potential Federal Reserve rate hike next month.

A rally in European shares is picking up pace after stalling since reaching a three-month high on April 20. The Stoxx 600 climbed as much as 16% from a February low before losing steam amid concern about slowing global growth, Fed policy tightening and mixed earnings reports.

The Stoxx 600 closed above its 50-day moving average on Tuesday for the first time after slipping below it earlier this month. That sends a short-term bullish signal in technical analysis, according to Saxo Bank A/S trader Pierre Martin.

Traders are pricing in a one-in-three chance of higher borrowing costs in June after Fed officials indicated willingness to act if the economy shows sustained improvement. That’s up from 4% last Monday. July is now the first month with more than even odds for a rate rise. Fed chair Janet Yellen is scheduled to speak on Friday after European markets close.

Among shares active on corporate news, Novo Nordisk A/S gained 2.3% after its once-a-day combination drug for diabetes won unanimous backing from a group of advisers to the US Food and Drug Administration. Marks & Spencer Group tumbled 6.6% after saying profits will be hurt by investments in a turnaround plan.