European shares rose for the first week in four as better-than-expected company earnings and measures of German confidence outweighed concern that the US Federal Reserve would scale back its asset-purchase program.
The STOXX 600 climbed 0.4 percent to 288.57 this week. The measure has advanced 3.2 percent this year as US lawmakers agreed on a compromise federal budget avoiding automatic fiscal changes that had threatened to push the world’s biggest economy into recession.
“I expect a bigger correction to come in the next few weeks, so this is a good opportunity to buy shares as companies are able to produce good profits, as we’ve seen this week,” said Thomas Stucki, who helps manage about US$3.8 billion as chief investment officer at Hyposwiss Private Bank AG in Zurich. “An important support to the stock market is still the lack of alternatives to equities.”
National benchmark indexes climbed in 10 of the 18 western European markets. The UK’s FTSE 100 increased 0.1 percent and France’s CAC 40 added 1.3 percent. Germany’s DAX gained 0.9 percent.
In Germany, investor confidence increased to the highest level in almost three years this month. The index of investor and analyst expectations climbed to 48.2 from 31.5 last month, the ZEW Center for European Economic Research said this week.
That exceeded the median estimate of economists in a Bloomberg survey calling for an increase to 35.
Separately, the Ifo institute’s business climate index for Europe’s biggest economy, based on a survey of 7,000 executives, climbed to 107.4 this month from a revised 104.3 last month. The median of 38 forecasts in a Bloomberg News survey had called for an increase to 104.9. The latest reading was the highest since April last year.
Still, the eurozone economy will shrink for a second year this year, driving unemployment higher as governments, consumers and companies curb spending, the European Commission said.
The 17-nation eurozone’s GDP will fall 0.3 percent this year, compared with a prediction from November last year of 0.1 percent growth, the Brussels-based commission forecast.
Unemployment will climb to 12.2 percent, up from the previous estimate of 11.8 percent and 11.4 percent last year, it said.