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Industrials, earnings hopes help European shares shrug off China data

Published 16/07/2018, 10:00
© Reuters. FILE PHOTO - The German share price index, DAX board, is seen at the stock exchange in Frankfurt

By Helen Reid

LONDON (Reuters) - Strong industrials and expectations for a better earnings season helped European shares make hesitant gains on Monday while data showing slowing economic growth from China kept a lid on the market's progress.

The pan-European STOXX 600 (STOXX) climbed 0.2 percent, while Germany's DAX, which is heavily exposed to China, inched up 0.1 percent.

Basic resources (SXPP) and autos (SXAP) stocks were the worst-performing sectors as both rely on solid growth in China, whose economy grew 6.7 percent in the second quarter, cooling from 6.8 percent registered in the previous three quarters.

But investors shrugged off the slightly weaker data in order to focus on company earnings expected to support the market.

"Despite all the noise around China and Trump, you are going to get a real indication of macroeconomic health much more from company management," said Ian Williams, strategist at Peel Hunt.

Second-quarter earnings for the STOXX 600 are set to grow 8.1 percent year-on-year, an improvement on the first quarter.

"Earnings results will likely be strong, beating in both the U.S. and Europe by a good 4 to 5 percent margin," wrote JP Morgan strategist Mislav Matejka in a note.

"The guidances are the unknown, but we note that trade headlines might be losing some of the shock value as many investors now expect further bad news on this front."

Results drove some of Europe's biggest movers.

Deutsche Bank (DE:DBKGn) shares jumped, rising more than 5 percent to a six-week high after the German lender reported preliminary second-quarter results above consensus with a better than expected capital buffer.

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Worries over the bank's solvency have cratered its shares, down 36 percent year-to-date. Its gains on Monday helped propel the banking sector index (SX7P) to the top, up 0.6 percent.

In other earnings-driven moves, fish farmer Marine Harvest (OL:MHG) fell 2.6 percent after it reported lower second-quarter earnings and harvest volumes below its own guidance.

Drugmaker Indivior (L:INDV) was top of the STOXX, surging 33 percent after a U.S. court blocked India's Dr. Reddy's Laboratories (NS:REDY) from selling generic versions of its bestselling opioid addiction treatment in the United States.

Elevator firm Kone (HE:KNEBV) drove gains among industrials with a 2.2 percent gain after a report that the Finnish company and Germany's Thyssenkrupp had held merger talks on their elevator operations. Thyssenkrupp (DE:TKAG) traded flat.

Shares in French technology consultancy firm Altran (PA:ALTT) climbed 3.8 percent after Friday's 30 percent plunge on the discovery of forged orders at its recently acquired U.S. business Aricent.

Broker recommendations also moved some stocks.

French publisher Lagardere (PA:LAGA) rose 2.1 percent after Morgan Stanley (NYSE:MS) upgraded it to overweight, while British software firm Micro Focus (L:MCRO) fell 4.4 percent after a Credit Suisse (SIX:CSGN) downgrade to underweight.

Finnish telecoms company Elisa (HE:ELISA) fell 4.2 percent after JP Morgan cut it to neutral from overweight, saying competition remains volatile.

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