Europe: Stocks bounce back as strong earnings in focus, Stocks
[LONDON] Investors piled back into European stocks on Wednesday, boosting indexes higher in a rally a day after geopolitical concern caused a drop across equity markets.
The pan-European Stoxx 600 gained 0.7 per cent, recovering nearly all the ground lost the day before when North Korea’s missile launch sparked a sell-off.
Euro zone stocks and blue chips rose 0.6 per cent.
Banking stocks, which had led the risk-averse move lower on Tuesday, rose 0.4 per cent. Mining companies gained 1.7 per cent, leading sectoral gainers in the region.
Fears of a more drawn-out correction dissipated.
“Market jitters such as these are unlikely to turn into a longer-term period of outright risk-off sentiment,” Credit Suisse strategists said.
Investors’ focus turned back to encouraging earnings news on Wednesday, driving an advance across all sectors.
Shares in French medical equipment supplier Biomerieux led gains, jumping 8 per cent after it raised its 2017 forecasts, bolstered by a strong first half. Its shares have risen more than 30 per cent year-to-date, outperforming the healthcare sector’s modest one per cent gains.
Shares in German broadcaster RTL rose 2.1 per cent after it boosted second-quarter revenue, beating expectations despite an advertising market it called challenging.
RTL helped the media sector gain 0.9 per cent, recovering from the nine-month low it reached in the previous session after broadcaster Prosiebensat cut its outlook for advertising revenues.
Stronger first-half profit and growing business volume helped Swiss insurer Baloise gain 1.3 per cent.
“The additional solvency disclosure confirmed the company is strongly capitalised; as such Baloise remains an excellent name for yield-seeking investors,” said Baader Helvea analysts, although they added the stock is not a bargain on valuation.
Broker upgrades also spurred some moves higher.
Finnish elevator company Kone jumped 2.9 per cent after Morgan Stanley analysts switched their preference to it from Schindler, saying Kone could benefit more from a pick-up in elevator orders in China, where it has a leading market position. Schindler edged up 0.3 per cent.
Citi analysts’ “buy” rating on British online grocer Ocado sent its shares up 4.3 per cent.
The US bank’s analysts said automation – which Ocado has developed in its warehouses – would become increasingly prevalent and online grocery shopping would grow.
One weak spot was Swedish property developer JM, whose shares sank 4.5 per cent after Norwegian building association OBOS said it sold all its shares in JM.
European stocks have seen some sharp moves in recent weeks, punctuating an unusually calm year, but sell-offs have tended to fizzle out. Confidence in the region’s economic growth and cheap valuations compared with the US market continue to draw investors.
Earnings growth also remained encouraging. With the majority of company reports through, Thomson Reuters data estimated earnings for the Stoxx 600 would increase 16 per cent year-on-year for the second quarter.