Europe: Shares end February near 14-month peak ahead of key Trump speech

[MILAN] European shares edged higher on Tuesday as investors awaited US President Donald Trump's first speech to Congress for more details on his tax cuts and infrastructure spending plans.

The STOXX 600 rose 0.2 per cent to snap a four-session losing streak and end February up 2.8 per cent, close to a 14-month peak hit earlier in the month.

European shares have rallied more than 10 per cent since Mr Trump was elected in November as global stock markets surged in anticipation of his expansive economic policies. Investors have also cheered data confirming an economic recovery in Europe and a turn around in company earnings.

But on Tuesday investors said there were risks that Mr Trump's speech later in the day could disappoint, triggering a sell-off.

"This evening's speech will have to include a convincing high level outline of tax cuts and spending increases for euphoria to be sustained," Trevor Greetham, Head of Multi Asset at Royal London Asset Management, said in a note.

Before the speech, Mr Trump called on Monday for a "historic" increase in military spending, fuelling sharp gains among defence and engineering stocks. A White House budget official put the potential boost to defence spending at US$54 billion.

Europe's aerospace and defence index rose 2.1 per cent to its highest closing level since December 2015.

British defence and energy engineer Meggitt was the biggest gainer on the STOXX index, up 13 per cent, buoyed by Mr Trump's remarks and a solid earnings update. The company posted a 13-per cent rise in adjusted profits and raised its dividend payout.

GKN was up 4.9 per cent after the British engineering group reported a 12-per cent rise in adjusted pretax profit, beating market expectations, and said it would grow faster than both its main aerospace and autos markets in 2017.

Spanish builder Ferrovial, which is also exposed to the US market, rose 4.3 per cent after announcing results and saying that its order book last year was higher than in 2015.

Shares in Burberry rose as much as 5 per cent to a 1-1/2 year high in a late-day volume spike after activist investor GBL disclosed a 3 per cent stake in the luxury goods company.

Berenberg analysts said the news was a positive for Burberry shares, noting the sharp rally in Adidas after GBL disclosed a 3 per cent stake in the German sportswear maker in 2015.

The European basic resources index fell 1.1 per cent, the biggest sectoral decliner in Europe. It was dragged lower by losses in mining heavyweights BHP Billiton, Rio Tinto and Glencore even though these stocks recovered from their lows as metal prices turned higher, lifted by ongoing strikes in Canada and Chile.

Precious metal miner Fresnillo ended flat, outperforming the sector after reporting a more than six-fold jump in its profit for the year on higher output and a weak Mexican peso.

Elsewhere, price comparison site Moneysupermarket.com and Dutch industrial services company Aalberts Industries fell 6.1 per cent and 2.4 per cent following disappointing results.

REUTERS