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Shares in Eurozone banks have finally recovered the losses suffered in the global sell-off that hit markets at the start of last year, with a key index of the sector hitting its highest level since the end of 2015.

Bank stocks were hit hard last year, initially prompted by fears of an economic shock in China. Political shocks including the Brexit vote as well as structural problems in countries including Italy and Germany hampered its recovery, but the shares have rallied strongly since Donald Trump’s US election victory.

The prospect of stronger economic growth has boosted investor confidence in Europe’s banks, while rising inflation has raised hopes of an end to the negative interest rates that have weighed on profits.

On Thursday the Euro Stoxx Banks Index climbed 2.4 per cent, with not a single constituent in the red, reflecting a wider positivity in European stock markets after yesterday’s Federal Reserve meeting and the defeat of the populist PVV in elections in the Netherlands. A high of 127.16 for the morning was its strongest level since December 31 2015.

Copyright The Financial Times Limited 2017. All rights reserved.

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