EasyJet agrees to £5.5B Castlelake takeover as Europe’s rally hits new highs

Europe's STOXX 600 closed at a record high of 652.35 on Friday, capping its fourth consecutive week of gains and its strongest quarterly performance since late 2020, as a broadening rally beyond technology stocks and a wave of corporate deal-making energized investors.

A Bumper Quarter for European Equities

The pan-European benchmark climbed 0.7% on Friday to register its sharpest weekly jump since mid-May, according to Reuters. For the second quarter, the index surged roughly 10%, its best quarterly performance in more than five years, driven by enthusiasm for artificial intelligence and easing geopolitical tensions following a preliminary U.S.-Iran agreement in June.money.usnews+3

Technology stocks posted their largest quarterly gain since 2001, with ASML ↗ 2.81% providing the biggest single-stock boost to the index on Friday. Financials and industrials also led gains for the quarter, while energy stocks slumped from prior highs, according to Morningstar. Germany's DAX also notched an all-time high, closing up 0.8%.money.usnews+3

Corporate Deals Add Fuel

The rally received fresh impetus over the weekend when easyJet and U.S. investment firm Castlelake announced an agreement in principle on a takeover valued at £5.5 billion on a fully diluted basis, or £6.90 per share. The deal, announced on Sunday, would mark a new chapter for the 31-year-old budget carrier after it had previously rejected three lower bids from Castlelake. A binding offer deadline has been set for August 3.ch-aviation+2

Macro Backdrop Supports Optimism

Investors were buoyed by a lukewarm U.S. jobs report that reinforced expectations the Federal Reserve will hold off on rate hikes, while eurozone inflation rose at a slower-than-expected pace in June. European Central Bank President Christine Lagarde said risks to inflation and growth are now "more balanced," and traders priced in roughly 23 basis points of ECB rate cuts for the remainder of the year. Defence stocks were among the week's top performers alongside cyclicals such as banks and financial services, as previously tech-concentrated gains broadened out.wmbdradio+2

Investor attention now turns to second-quarter corporate earnings, which will test whether the rally's momentum can be sustained.global.morningstar