International

European shares break seven-day losing streak

MILAN/LONDON: European shares broke a seven-day losing streak Wednesday as investors took heart from a recovery on Wall Street and reduced volatility, returning their focus to some upbeat company earnings. All sectors in Europe were trading in positive territory, helping the pan-European STOXX 600 index rise 2.1 percent at the close.

It marked its best gains since Emmanuel Macron clinched the French presidency in April last year.

The index Tuesday had suffered its worst fall since the Brexit vote in 2016.

The index was still down 2.2 percent year-to-date, however, after the global equity rout. The gauge of European stocks volatility fell back nearly 30 percent to 21.4, having had its biggest ever surge Tuesday.

Traders said further turbulence could not be ruled out, though, as volatility remained high in the wake of historic stock market declines caused by worries about inflation.

“It remains too early for the moment to suggest that this might be the end to this particular bout of weakness,” said Michael Hewson, chief market analyst at CMC Markets U.K.

A number of well-received company updates provided support to the index.

Hexagon soared 10.8 percent to lead gainers on the STOXX after the Swedish industrial technology company reported fourth-quarter core earnings ahead of analyst forecasts.

Statoil gained 4.6 percent. The Norwegian oil producer said it would raise its dividend after beating fourth-quarter earnings forecasts, helped by higher oil prices.

“We see this as a decent set of numbers with some positive commentary on the growth portfolio, as well as guidance on significant FCF [free cash flow] to come through,” analysts at RBC Capital Markets said.

Among country benchmarks, Britain’s FTSE 100 gained 1.9 percent, while Germany’s DAX rose 1.6 percent. The German index showed little reaction to German Chancellor Angela Merkel’s Conservatives securing a coalition deal with the Social Democrats.

“It’s not a big thing for the equity markets,” said Sebastian Raedler, head of European equity strategy at Deutsche Bank, adding that unlike other elections, such as Macron’s victory in France last year, there was not much negative political risk to price out of German equities.

“It’s a secondary story” after the brutal sell-off shaking Wall Street on Monday, Raedler added.

Miner Rio Tinto’s shares edged up 0.9 percent, paring back earlier gains as its record dividend failed to impress investors.

Delivery Hero jumped 4.9 percent after strong results and insurer Hannover Re closed up 2.2 percent after upping its profit guidance.

Some firms disappointed, with ABN Amro falling 3.4 percent. The Dutch bank beat analyst expectations with a 63 percent jump in fourth-quarter net profit, but some traders voiced concerns about cash returns, saying it was light on capital.

Enzyme maker Novozymes and brewer Carlsberg also fell sharply, down 4.6 percent and 3.6 percent respectively, following their updates.

Orion shares sank 10.5 percent, the worst-performing on the STOXX, after the Finnish pharma company gave a disappointing revenue guidance.

According to Thomson Reuters data, 48.2 percent of STOXX 600 companies that have reported results so far exceeded earnings estimates, but that’s below the 50 percent beat seen in a typical quarter.

 
A version of this article appeared in the print edition of The Daily Star on February 08, 2018, on page 5.

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