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Europe stocks rise as earnings optimism counters virus fears

by Jonathan Adams
Europe stocks

The Stoxx 600 index advanced 0.7 per cent after a seven-week rally ran into profit-taking

Stocks in Europe rebounded on Wednesday following their worst sell-off this year as optimism about a strong earnings season countered worries about a rapid rise in coronavirus cases in some countries.

The pan-European Stoxx 600 index advanced 0.7 per cent after a seven-week rally ran into a bout of profit-taking on Tuesday, when it dropped 1.9 per cent.

Healthcare stocks gave the Stoxx 600 its biggest boost, with Swiss drugmaker Roche climbing 3 per cent after predicting a surge in demand for its drugs for the remainder of 2021.

Semiconductor equipment maker ASML climbed 4.1 per cent to lift tech stocks after it raised its full-year sales forecast, citing strong demand amid a global computer chip shortage.

Smaller rival ASM International gained 1.2 per cent on forecasting a rise in second-quarter orders.

European company earnings are expected to increase a record 61 per cent in the first quarter of 2021, based on Refinitiv IBES data, placing Europe on course for a rare outperformance compared with corporate America.

But, markets remains all-too-aware that earnings season provides the potential for some more downside as companies find themselves struggling to spin a positive case to justify further appreciation in their stock prices, said Chris Beauchamp, chief market analyst at IG.

With global equities trading at all-time highs and earnings expectations surging as vaccination drives and stimulus programmes support global recovery, concerns about stretched valuations remain.

On Wednesday, the European Union crossed one its last major barriers to launch a 750 billion euro ($902.51 billion) recovery fund.

But, other risks such as inflation and a stock market correction are starting to become more dominant than the pandemic, a top official at Norway’s US$1.3 trillion wealth fund said.



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