European Shares Set to Log Weekly Gains on Strong Earnings Boost
European shares are on track to end the week with gains, driven by positive earnings updates and expectations of rate cuts by the European Central Bank (ECB). The upbeat earnings reports have boosted investor confidence in risky assets, pushing the pan-European STOXX 600 index up by 0.5% to a two-year high. Miners have been particularly strong this week, with a 1.7% jump in their share prices.
The STOXX index of the 50 largest companies is hovering around its highest level in 23 years, while a gauge of eurozone blue-chip shares has reached an all-time high. German and French stocks have also extended their gains, hitting another record high.
In the UK, the FTSE 100 has outperformed its regional peers with a 0.7% rise, following better-than-expected retail sales data. British retail sales rose by 3.4% in January, rebounding from a decline in the prior month. However, analysts note that the rise in sales was driven by increased prices, indicating that consumers are actually buying less than they were before the pandemic.
Boosting market sentiment, ECB member and Bank of France head Francois Villeroy de Galhau has highlighted several reasons why the ECB should not delay an initial interest rate cut this year. This statement has heightened expectations of a rate cut in the near future. Additionally, ECB policymaker Isabel Schnabel has cautioned that Europe’s sluggish productivity growth could slow down the fall in inflation to the ECB’s target of 2%.
Several companies have reported strong earnings, further supporting the positive sentiment in the market. Metso Corp, a Finnish mining equipment maker, saw its shares jump by 8.3% after reporting a fourth-quarter profit beat and providing an optimistic outlook for its aggregates unit. British bank NatWest also advanced by 1.9% after posting a profit forecast for 2023 that exceeded expectations. The bank is preparing for a significant sale of state-owned stock in the company following a challenging year marred by scandal.
Swiss construction chemical maker Sika reported annual earnings in line with analyst estimates and expects sales to increase by 6% to 9% in 2024, leading to a 3.2% rise in its share price. On the other hand, Belgium’s Umicore dropped by 3.9% after forecasting a decline in its 2024 core profit. Italian energy group Eni reported a fourth-quarter adjusted net profit of €1.64 billion (RM8.44 billion), beating analysts’ expectations but observed a 1.6% slide in its share price. Swiss reinsurance company Swiss Re witnessed a 1.2% decline in its shares despite a 580% surge in net profit for 2023, as it recovered from a challenging period the previous year.
Semiconductor equipment supplier Aixtron experienced a 6.4% increase in its share price. The company received a boost from a strong demand for advanced chips used in artificial intelligence, as evidenced by a better-than-expected second-quarter revenue forecast from Applied Materials.
Overall, European shares are set to close the week with gains, fueled by impressive earnings updates and the anticipation of rate cuts by the ECB. The positive market sentiment reflects investors’ growing appetite for risky assets.
