European shares had their strongest week in more than two months as investors piled back into equities on signs that the world’s major central banks would likely not tighten monetary policy as quickly as some had feared.
The move on indices on Friday was more muted as investors digested disappointing earnings reports from major US, banks including JPMorgan Chase & Co and Citigroup Inc, which sent banking stocks lower.
The pan-European STOXX 600 inched up 0.1 percent while eurozone bluechips fell 0.2 percent.
The STOXX 600 is up 1.8 percent this week in the biggest five-day rally in more than two months.
“In Europe, we’re still not dealing with any higher interest rates, which should be benefiting the US [banks] slightly in terms of net interest margin,” Accendo Markets head of research Mike van Dulken said. “That said we’ve still got the supportive QE helping, but yields are still low, which is not great for the banks.”
Flows data showed investors rushed back into equities this week as the US Federal Reserve’s tone rekindled their enthusiasm for riskier assets.
Firmer metals prices underpinned gains on mining stocks.
Miners were led to a three-month high by steel firms Outokumpu Oyj, ArcelorMittal SA, and Tenaris which rose after US President Donald Trump said that he was considering quotas and tariffs on Chinese steel dumping.
Analysts at Barclays PLC said they remained positive on the European mining sector, which has gained just 4 percent so far this year after rallying more than 60 percent last year.
“Chinese rates are falling, demand indicators across the economy appear healthy, industry capex discipline is holding, M&A is generally off the agenda, and resulting strong cashflows are being utilised for balance sheet reconstruction and distributions to shareholders,” Barclays analysts said in a note.
While a rise in bond yields has hit rate-sensitive sectors, such as utilities, banking stocks have benefited.
However, on Friday, the sector was under pressure as earnings from major US banks disappointed, and data indicated inflation in the US was slowing, potentially putting a dampener on the Fed’s monetary policy tightening plans.
Banks gain when interest rates rise, widening their margins.
Eurozone banks fell 0.7 percent, leaving them unchanged on the week after a strong performance last week.
Swedish lender SEB AB jumped 1.3 percent after its second-quarter profit topped forecasts.
Other Nordic stocks were also in focus as Norwegian insurer Gjensidige Forsikring ASA slumped 6.5 percent to the bottom of the STOXX 600 after its second quarter results came in below forecasts.
European earnings get underway in earnest later this month. Overall, analysts are calling for about 9 percent year-on-year earnings growth for top European firms, compared to about 8 percent for the US, according to Thomson Reuters I/B/E/S.
Additional reporting by Bloomberg
SEASONAL WEAKNESS: The combined revenue of the top 10 foundries fell 5.4%, but rush orders and China’s subsidies partially offset slowing demand Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) further solidified its dominance in the global wafer foundry business in the first quarter of this year, remaining far ahead of its closest rival, Samsung Electronics Co, TrendForce Corp (集邦科技) said yesterday. TSMC posted US$25.52 billion in sales in the January-to-March period, down 5 percent from the previous quarter, but its market share rose from 67.1 percent the previous quarter to 67.6 percent, TrendForce said in a report. While smartphone-related wafer shipments declined in the first quarter due to seasonal factors, solid demand for artificial intelligence (AI) and high-performance computing (HPC) devices and urgent TV-related orders
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and the University of Tokyo (UTokyo) yesterday announced the launch of the TSMC-UTokyo Lab to promote advanced semiconductor research, education and talent development. The lab is TSMC’s first laboratory collaboration with a university outside Taiwan, the company said in a statement. The lab would leverage “the extensive knowledge, experience, and creativity” of both institutions, the company said. It is located in the Asano Section of UTokyo’s Hongo, Tokyo, campus and would be managed by UTokyo faculty, guided by directors from UTokyo and TSMC, the company said. TSMC began working with UTokyo in 2019, resulting in 21 research projects,
Quanta Computer Inc (廣達) chairman Barry Lam (林百里) yesterday expressed a downbeat view about the prospects of humanoid robots, given high manufacturing costs and a lack of target customers. Despite rising demand and high expectations for humanoid robots, high research-and-development costs and uncertain profitability remain major concerns, Lam told reporters following the company’s annual shareholders’ meeting in Taoyuan. “Since it seems a bit unworthy to use such high-cost robots to do household chores, I believe robots designed for specific purposes would be more valuable and present a better business opportunity,” Lam said Instead of investing in humanoid robots, Quanta has opted to invest
EXPANSION: While Gigabyte Technology is optimistic about market demand this year, uncertainty remains due to the impact of potential US tariffs and currency fluctuations Motherboard and graphics card maker Gigabyte Technology Co (技嘉) yesterday said that it plans to launch an artificial intelligence (AI) server assembly line in the US in the second half of this year. The company’s core motherboard and graphics card businesses in the US remain stable, but sales of its higher-priced AI servers still hinge on the development of tariff policies, Gigabyte chairman Dandy Yeh (葉培城) told reporters following the company’s annual shareholders’ meeting in Taipei. Yeh was referring to the “reciprocal” tariffs announced by US President Donald Trump on April 2, which were later postponed for 90 days. While Gigabyte
RSS