European stocks ended lower on Friday after dismal GDP data, but marked a third straight month of gains on strong corporate earnings and optimism about an economic recovery from the COVID-19 pandemic.
The pan-regional STOXX 600 fell 0.3 percent, hovering below its all-time high, and ending the month 1.8 percent higher. It fell 0.4 percent for the week.
Data showed that the eurozone economy dipped into a second technical recession after a smaller-than-expected contraction in the first quarter of this year, but is set for recovery as pandemic curbs are lifted amid accelerating vaccination campaigns.
The German economy contracted by a greater-than-expected 1.7 percent, hit by renewed lockdowns, while the French economy grew more than expected.
However, strong earnings showed companies in the eurozone were well on their way to recover from the effects of the pandemic.
AstraZeneca PLC jumped 4.3 percent as the British drugmaker posted better-than-expected results and forecast second-half growth.
Swedish Match AB rose 0.7 percent after the tobacco group reported a much higher first-quarter operating profit than expected, helped by growth in its Smokefree product segment.
UK peers British American Tobacco PLC and Imperial Brands PLC rose more than 2 percent each.
Broadly, European earnings have come in much stronger than expected, with a higher than usual 71 percent of companies beating profit expectations in the first quarter, according to Refinitiv IBES data.
One-third of STOXX 600 companies have published results so far.
“Expectations are high, companies are beating even these elevated expectations, and yet the market is responding with caution,” Federated Hermes portfolio manager Lewis Grant wrote in a note. “At current valuations, and with much pandemic-related uncertainty remaining, many investors are more concerned about downside than upside.”
Strong earnings from British firms last month helped the European retailers sector outpace its peers with a 6.7 percent bounce, while automobile stocks lagged as a global semiconductor shortage hurt production.
Banking stocks came under pressure on Friday as eurozone bond yields eased from their highest level since January last year.
However, the sector raced past its peers this week with a near 6 percent gain, driven by a swathe of strong earnings.
Barclays PLC tumbled 7 percent, despite reporting a quarterly profit that more than doubled, while France’s BNP Paribas SA slipped 0.8 percent on higher costs.
Spain’s Banco Sabadell SA jumped 8.7 percent to the top of the STOXX 600 after its quarterly profit beat market expectations, helped by strength in its British unit TSB.
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