Europe: Shares claw back gains after worst week in 6 months

[MILAN] European shares staged a modest recovery on Friday after suffering heavy losses this week prompted by political turmoil in the United States that fuelled worries over President Donald Trump's stimulus plans and dented appetite for riskier assets.

The pan-European STOXX 600 index rose 0.6 per cent, not enough to turn it around from its worst week in six months. Britain's FTSE and euro zone blue chips also gained 0.4 and 0.7 per cent respectively.

While gains were spread across all sectors, financials - among the most hit by this week's sell-off - gave the biggest boost to the STOXX with heavyweight banks BNP Paribas and UniCredit up 2 per cent.

Spain's Banco Popular jumped 10 per cent after sources said Santander or Bankia were likely to acquire the bank, which is struggling to clean up soured property assets.

The bank propelled Spain's IBEX up 1.4 per cent.

Among the biggest movers was airport retailer Dufry , up 5 per cent after luxury group Richemont bought a 5 per cent stake in the company.

German utility RWE jumped 5.4 per cent after sources said it was considering merging with France's Engie . The firms are considering a share swap to create Europe's first truly cross-border utility.

Engie shares were up 0.6 per cent, while RWE's majority-owned Innogy gained 3.4 per cent on the news.

South African retail group Steinhoff jumped 7.2 per cent as investors gave a warm receiption to plans to spin off its African retail business.

STRONG EARNINGS

This week's losses have pulled the STOXX down from 21-month highs hit after a run driven by big inflows into Europe, solid economic data and surprisingly strong corporate earnings.

With 80 per cent of European companies having reported so far, 65 per cent of them have beaten expectations and 8 per cent have met them, according to data.

After the latest company updates, however, first-quarter earnings growth is seen at 19.4 per cent, slightly below the over 20 per cent previously forecast.

Easing fears about the euro zone's stability after the defeat of a eurosceptic candidate in the French presidential vote this month added fuel to the recent rally.

Flows data from Bank of America Merrill-Lynch showed investors remained strongly bullish on Europe, with the region's equity funds drawing inflows for the eighth straight week, while investors rushed out of US stocks.

On the same front, some investors welcomed developments in Greece, where lawmakers approved further austerity measures overnight, making more progress towards unlocking bailout funds.

"No doubt averting another Greek crisis or at least another stand-off between the Greek government and its creditors should help stocks," London Markets trader Markus Huber said.

Athens stocks were up 0.2 per cent.

Elsewhere, companies with exposure to Brazil such as Casino, Telefonica and Telecom Italia steadied following losses in the previous session triggered after a bribery scandal hit the country's president, darkening the outlook for structural reforms there.

REUTERS