BERLIN, April 8 — European shares rallied today to erase weekly losses, while investors focused on a tight race between far-right rival Marine Le Pen and incumbent Emmanuel Macron in the runup to the first round of French presidential elections over the weekend.

Financials and commodity stocks, led the gains with all major sectors in positive territory. The pan-European STOXX 600 index added 1.1 per cent and is now set to end the week at about 0.6 per cent higher.

Topping the index was Banco BPM’s 14.1 per cent surge, after French bank Credit Agricole said it has bought a 9.2 per cent stake in Italy’s third-largest bank.

"European markets are mostly playing catch up with the US from yesterday’s close,” said Julien Lafargue, chief market strategist at Barclays Private Bank, adding that investors are waiting to get a sense of what earnings could look like with big US banks set to kick off next week.

"Investor mood is not very optimistic these days. As long as earnings are okay, we could see positive surprises on the back of that.”

Despite a 12 per cent recovery from one-year lows hit in March, the STOXX 600 index is still down more than 6 per cent this year on worries that surging inflation due to the Ukraine war will trigger central bank moves that could squeeze growth.

"Europe wasn’t really the best place already because of what is going on in Ukraine. It’s going to be tricky for Europe to significantly outperform until we have clarity. The next month and a half will be pretty important for Europe,” said Lafargue.

In Sunday’s first round of election in France, centre-left Macron is seen winning, but rival Marine Le Pen has surged in polls in recent weeks, leaving her victory within the margins of error. The two leading candidates from the vote will head to a run-off on April 24.

Barclay’s Lafargue said despite the polls, the turnout or lack thereof could swing the election.

France’s CAC 40 index rose 1.8 per cent, but is down about 1.7 per cent this week — the most among European peers — on election uncertainty.

Among other stocks, Atlantia’s rallied 3.7 per cent after a report that top shareholder Edizione and Blackstone could launch a bid for the Italian infrastructure group at 24 euros per share around Easter.

Telecom Italia slipped 1.0 per cent after it rejected a €10.8 billion  (RM49 billion) offer from KKR. — Reuters