A sharp rise in European yields led by German Bunds in response to a greater-than-2% German inflation print this morning buoyed bank stocks. To some extent Europe’s rally today is pure beta: President Trump’s measured and moderate State of the Union address reassured markets that nothing untoward would be coming their way from the White House. Banks were the biggest winners, though, as markets saw the prospect of higher yields as the improving European economies shifted from deflation to inflation. Higher rates are good for banks. The chart shows that rising Bund yields tracked but also anticipated the rise in the STOXX bank index (SX7E).