European shares mark best week since April on boost from banks, healthcare

By Amir Orusov and Purvi Agarwal

(Reuters) -European shares logged their best weekly showing in five months on Friday with healthcare and miners leading advances on the day as rising bets on a Federal Reserve rate cut buoyed sentiment.

The pan-European STOXX 600 index closed 0.5% higher at a record high for the third session running, bringing its weekly gains to 2.8%. The index had hit intraday record highs earlier in the week.

Healthcare stocks were the biggest boosts, up 1.3%, with AstraZeneca and Novo Nordisk gaining 1.6% and 2.1% respectively. The sector outperformed peers this week after a U.S. Pfizer drug pricing deal eased uncertainty.

"While the Pfizer deal is not an outright 'all clear' signal for the sector, with key details lacking on the tariffs, a boost in near-term sentiment and robust long-term drivers should support a positive outlook," analysts at UBS Global Wealth Management said in a note.

Banks added 1%. Raiffeisen topped the STOXX 600 with a 7.4% rise after the Financial Times reported the European Union is looking at lifting sanctions on assets linked to Russian oligarch Oleg Deripaska to compensate the Austrian bank.

ABN Amro climbed 2.7% after Goldman Sachs upgraded its rating on the Dutch bank to "buy" from "sell".

Basic Resources, which houses Europe's top mining companies, gained 1.7%, tracking higher base metal prices.

With the U.S. government stuck in shutdown, a key U.S. jobs report that was initially expected on Friday has been delayed, at a time when markets and the Federal Reserve are focused on labor market data to assess the outlook for further monetary policy easing.

Hopes of softer Fed policy and a healthcare rally have helped drive the STOXX 600 to record highs, narrowing the gap with Wall Street. The index is up 12.4% year-to-date, versus a 14.7% gain in the U.S. benchmark S&P 500.

"It does very much feel that the market is looking past the ongoing U.S. government shutdown and focusing on Fed rate cut expectations," said Fiona Cincotta, senior market analyst at City Index.

Trader bets indicate a near-certain chance of a Fed rate cut later this month according to the CME FedWatch Tool following a weak private payrolls report earlier this week.

Growth in the euro zone services sector accelerated slightly in September to an eight-month high and Germany's services sector also recorded its fastest growth in eight months.

Meanwhile in France, its dominant services sector contracted more than initially estimated in September while British business activity grew at the slowest pace in five months.

Among other moving stocks, Sofina dipped 3.2%, among the bottom performers on the STOXX 600, after the investment firm's 545-million-euro ($639.67 million) rights issue.

(Reporting by Shashwat Chauhan and Purvi Agarwal in Bengaluru and Amir Orusov in Gdansk; editing by Nivedita Bhattacharjee and Mark Heinrich)