Earnings lift European shares

A slew of upbeat updates from European firms helped the region’s benchmark index rise on Wednesday and recoup some of the previous session’s sharp losses, though weakness among construction firms and cyclical sectors weighed.

The pan-European STOXX 600 index rose up 0.2 percent while the blue chips were flat in percentage terms.

Dutch semiconductor equipment maker ASML, up 3.7 percent, boosted the tech sector. The firm beat quarterly earnings estimates thanks to strong demand from manufacturers of memory chips.

Europe’s tech sector has gained more than 14 percent so far this year, but worries over stretched valuations, especially among U.S. peers, have put the brakes on this rally.

Strong first-half profit growth boosted shares in Georg Fischer 6 percent to the top of the STOXX, while French video games maker Ubisoft jumped more than 5 percent on the back of a strong sales update.

Overall earnings in the second quarter are expected to grow by 7.9 percent from the same period last year, which would be an increase of 5.6 percent excluding the energy sector, according to Thomson Reuters I/B/E/S estimates.

“We would like to see those stronger earnings coming through and Europe really turning a corner,” said Dafydd Davies, partner at Charles Hanover Investments.

Energy stocks fell 0.1 percent, putting pressure on Britain’s FTSE 100, while banks were 0.2 percent lower, extending yesterday’s slide as Goldman Sachs put pressure on U.S. lenders.

Heavy losses for builder NCC and lock maker Assa Abloy weighed on the construction sector, which fell 0.6 percent.

NCC slumped more than 9 percent after its second quarter pretax profit came in below expectations, while Assa Abloy dropped 8.5 percent after saying that demand in China had turned sour again in the second quarter.

Cross-border deal-making rolled on with Reckitt Benckiser up 1.3 percent after saying it would sell its food business to U.S. spice and herbs co McCormick & Co Inc for $4.2 bln. Reckitt shares were the biggest boosts on the FTSE 100.

Shares in Spanish firms Aena and Abertis were suspended following a report that the Spanish airport operator had studied a possible takeover offer for the highway concessions company.

Reuters

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell