(Bloomberg) -- European stocks had their best day since January as strong earnings reports from Novartis AG and SAP SE overshadowed worries about interest rates. European banks surged to the highest since 2015.

The Stoxx Europe 600 rose 1.1% by the close, its biggest one-day jump since Jan. 26. The UK’s FTSE 100 index hit a record high. Recent equity market volatility and geopolitical risks have prompted investors to pile into the defensive sectors that characterize the UK benchmark.

“The UK is cheap relative to other markets,” said David Cumming, head of UK equities at Newton Investment Management. “The recent rise in bid activity is a further positive valuation signal.”

SAP shares rallied as a boom in demand for artificial intelligence fueled the German software company’s sales growth. Novartis gained after the pharma giant raised its forecast. Renault SA shares fluctuated after reporting earnings that benefited from robust prices and cost discipline. 

Citigroup Inc. strategists said that last week’s retreat was an opportunity to buy cheapened assets before the earnings season. Results from banks including Barclays Plc, BNP Paribas SA and Deutsche Bank AG are due this week. 

Economic data also provided positive signals for corporate profits and rebounding growth. Euro-area private-sector activity advanced to the highest level in almost a year on Tuesday, driven by a buoyant services sector and Germany’s return to growth. The UK’s recovery from recession unexpectedly gathered pace at the start of the second quarter as private sector firms reported the strongest growth in almost a year. 

“Investors are willing to add on risk to their portfolios given that the economic backdrop looks stronger than what had been priced in,” said Tatjana Puhan, chief investment officer at Copernicus Wealth Management.

For more on equity markets:

  • Utility Sector’s De-Rating Has Likely Gone Too Far: Taking Stock
  • M&A Watch Europe: Hibbett, JD Sports, Adnoc, Legrand, Petershill
  • Calls Grow for ‘Best of British’ to Ditch London: ECM Watch
  • US Stock Futures Little Changed; Apple Gains
  • Spending Taps On: The London Rush

You want more news on this market? Click here for a curated First Word channel of actionable news from Bloomberg and select sources. It can be customized to your preferences by clicking into Actions on the toolbar or hitting the HELP key for assistance. To subscribe to a daily list of European analyst rating changes, click here.

©2024 Bloomberg L.P.