European markets hit one-month high as earnings offset economic gloom

Europe’s Stoxx 600 index closed higher for the second straight day on Tuesday after a slew of better-than-expected earnings reports helped offset worries about fast-rising interest rates and a slowing euro-zone economy.

Companies’ quarterly updates helped lift sentiment despite lingering worries about a European recession as consumers and businesses buckle under pressure from surging inflation and higher borrowing costs to tame it.

“Our focus is on the forward outlook for Q4 and 2023 EPS, which has now started to fall, even though we believe it still to be at optimistic levels and thus subject to further cuts as companies report,” said Leonardo Pellandini, equity strategist at Julius Baer.

Dublin

Both AIB and Bank of Ireland fell as Europe’s largest bank, HSBC, cast a pall across the sector after announcing a 42 per cent slump in third-quarter profit. AIB was down 1.6 per cent to €2.88, while Bank of Ireland was down 1 per cent to €7.27. Ryanair shares rose 2.2 per cent to €11.69 amid a number of industry-related factors and positive sentiment from the group’s chief executive Michael O’Leary.

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“We think recession, price inflation is very good for our growth,” Mr O’Leary said, suggesting passengers do not stop flying during crises but become more price sensitive, opting for budget airlines such as Ryanair. Homebuilder Cairn rose by 5.7 per cent to 98 cents after completing a €75-million share buyback programme. PaddyPower Betfair owner Flutter rose by nearly 6 per cent €131.25, while food giant Kerry increased by 4 per cent to €94.02

London

London’s biggest market inched lower on Tuesday after strength in the pound weighed on the performance of UK multinational firms. Weakness among London’s banking stocks, driven by an underperformance by HSBC, was also a drag. However, optimism following the confirmation of Rishi Sunak as prime minister helped the markets regain significant ground from their intraday lows. The FTSE 100 ended the day little changed at 7,013.48.

British government borrowing costs also improved as yields on long-term debt eased back due to the improving market confidence.

In company news, HSBC slid lower in trading on Tuesday despite delivering higher profits over the past quarter. The banking giant reported adjusted pretax profits for the three months to September 30th of $6.5 billion, up from $5.5 billion a year earlier.

Yet the shares fell by 32.45p to 442.65p after it also announced the departure of its chief financial officer and executive director, Ewen Stevenson.

THG shares made gains after the Lookfantastic and Cult Beauty owner maintained its revenue guidance for the year, despite recent difficulties.

Europe

The pan-European Stoxx 600 index rose 1.4 per cent, to close at its highest level since September 20th, with real-estate, technology and financial sectors leading the gains. Boosting financial stocks, UBS climbed 7.7 per cent after the Swiss bank beat market expectations for quarterly profit due to a rise in new money inflows.

SAP gained 6.5 per cent after the German business software maker reported faster-than-expected revenue growth for the third quarter, while Logitech International jumped 12.5 per cent after the computer peripherals maker reaffirmed its full-year forecast. The European Central Bank (ECB) is widely expected to deliver a second straight 75 basis point rate hike this week, but a recent report suggesting the US Federal Reserve might slow its pace of rate hikes has raised hopes of a pivot from the ECB too.

New York

Wall Street’s main indexes rose for the third straight session on Tuesday, led by the Nasdaq, as a fall in US Treasury yields lifted megacap growth companies including Microsoft and Alphabet ahead of their earnings reports later in the day. Shares of Microsoft and Google-owner Alphabet were up 0.6 per cent and 1.2 per cent respectively, while Apple and Amazon.com also rose ahead of reporting quarterly earnings this week. Earnings from the companies will offer a glimpse into how corporate America is holding up in the face of decades-high inflation and tighter financial conditions.

“There is a positive view [on technology earnings],” said Giuseppe Sette, president of AI investment platform Toggle. “In a way, their ability to play through an inflationary cycle is strong, especially because tech has always had a very flexible ability to adjust prices.”

The tech-heavy Nasdaq jumped against a drop in the 10-year Treasury yield which touched a session low of 4.06 per cent from 4.23 per cent on Monday. Among Dow components, Coca-Cola rose 0.7 per cent after the company raised its annual revenue and profit forecasts, banking on steady demand amid price increases. — Additional reporting: Reuters