Sun, Apr 30, 2017 - Page 14 News List

European stocks rally on French election

Bloomberg

European stocks posted their biggest weekly gain since December last year, fueled by the first-round win of a pro-euro candidate in the French presidential election and a raft of stronger corporate earnings.

The STOXX Europe 600 on Friday slipped 0.2 percent, reducing the five-day gain to 2.4 percent, after eurozone consumer prices rose slightly more than expected, failing to stir markets after European Central Bank President Mario Draghi said inflation was still too weak to rein in stimulus.

Stocks on Monday rallied the most since June last year after a political centrist won the first round of French election.

Robust corporate earnings from companies, including Credit Suisse Group AG and Volvo AB, also bolstered markets.

European markets are to be closed on Monday for the Workers’ Day holiday.

With about one-third of companies having reported earnings so far this season among STOXX 600 members, earnings per share has jumped an annual 24 percent, on track to be the biggest increase since the third quarter of 2010, according to data from JPMorgan Asset Management strategists Emmanuel Cau and Mislav Matejka.

“The hard data for equities is earnings — and they are powering ahead. Q1 earnings season is very strong and revisions trends are positive and broad-based,” said analysts at Bank of America Merrill Lynch (BofA Merrill Lynch), who forecast 15 percent earnings growth for European companies and a further 8 percent rally for the STOXX 600.

Draghi on Thursday showed growing enthusiasm about the state of the eurozone economy, while saying that inflationary pressures remain too weak to contemplate paring back monetary stimulus.

Eurozone consumer prices this month rose an annual 1.9 percent, exceeding the estimate from economists for 1.8 percent.

Investors poured US$2.4 billion into European equity funds in the week through Wednesday, the most since December 2015, according to a BofA Merrill Lynch note.

There is a significant opportunity in the region’s equities, as the French election is likely to drive a lower risk premium and support “risk on” trade across the region, Citigroup’s equity strategists, including Jonathan Stubbs, wrote in note.

Among the most active shares, Barclays PLC dropped 5.2 percent, the most since June last yaer, after trading revenue declined surprisingly in the first quarter.

Additional reporting by Reuters

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