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European shares extended a rally on Thursday, as surging oil and metal prices lifted commodity stocks while a jump in banks boosted Italy’s main index 3.1%, its biggest daily increase since mid-March.

The continent-wide STOXX 600 index was up 1.9% on broad-based gains. Miners jumped 5.4% as copper rallied from 20-month lows on hopes that demand would improve in China. The energy sector surged 4%.

Banks jumped 3.4%, the biggest boost to the STOXX 600. Italy’s banks-heavy MIB index bounced further off November 2020 lows hit this week.

Trading remained volatile, as investors wondered whether market valuations have turned attractive after a sharp selloff on concerns central banks could trigger a recession with aggressive rate hikes to tame inflation.

European Central Bank policymakers debated flagging a larger interest rate hike for July and were keen to keep the door open to a bigger moves in subsequent meetings, minutes of their June meeting showed.

“The key question is will inflation come down first or do we need a recession for inflation to come down afterwards?,” said Dhaval Joshi, chief strategist at BCA Research.

“The problem we have is if economies enter recession, then we’re going to see quite a lot of profit downgrades.”

As of Tuesday, second-quarter earnings for STOXX 600 companies are expected to climb 19.2% year-over-year. Excluding the energy sector, earnings are expected to rise 2%, according to Refinitiv data.

London’s FTSE 100 rose 1.1% despite UK Prime Minister Boris Johnson’s resignation, as analysts said the move was expected given several ministers from his government quit in recent days after the latest in a series of scandals sapped their willingness to support Johnson.

“It is possible that the latest political upheaval will lead to somewhat looser fiscal policy than otherwise (in the UK),” said Capital Economics in a note. “The net result… will be somewhat stronger inflationary pressures.”

“Headwinds from rising interest rates and weakening economic growth will be a nasty combination for the FTSE 100, which we forecast to drop by another 4% or so this year, to 6,900.”

Chipmakers STMicroelectronics, BE Semiconductors, ASM International and ASML Holding gained between 2.9% and 4.6% after Samsung Electronics Co Ltd posted its best April-June profit since 2018.

Shares of Chr Hansen slid 9.8% to the bottom of STOXX 600 after the Danish food ingredients maker reported disappointing quarterly results and narrowed its organic revenue growth target for 2021/22.

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