Europe: Shares rise as earnings roll in

[LONDON] Supportive crude prices and strong results from energy firms and auto companies helped European shares rise on Wednesday.

The pan-European Stoxx 600 ended up 0.5 per cent, broadly in line with euro zone stocks and blue-chips, as oil and gas shares gained 0.8 per cent and autos climbed 0.6 per cent.

"Indications are more positive on the outlook for energy stocks, especially for the most geared such as oil services," said Angelo Meda, head of equities at Banor SIM in Milan.

"While there was a lot of kitchen sinking from firms in first-quarter numbers, they have reset expectations over valuations and cleaned up balance sheets now."

Tullow Oil rose 7.9 per cent after higher output from new fields helped sales at the Africa-focused oil producer rise 46 per cent in the first half, though it also reported impairment charges due to low oil prices.

Oil services firm Petrofac added 1.4 per cent after winning new contracts in Iraq worth US$100 million.

Peugeot maker PSA Group jumped 3.2 per cent, leading autos higher after the firm hit a new profitability record, beating analyst expectations with an increase in sales for the first half.

Recent euro strength has weighed on earnings expectations for euro zone corporates, particularly those most dependent on exports such as industrials firms.

The common currency rose to a two-year high of US$1.1711 on Tuesday.

"We believe that the impact is manageable if we don't go beyond US$1.20 to the euro," said Banor SIM's Mr Meda.

"If we do, it will start to have an impact and depress European stocks, especially exporters, cyclicals and industrials."

With a quarter of euro zone MSCI Europe companies having reported so far, 40 per cent have beaten earnings estimates while 48 per cent have missed, according to Thomson Reuters data.

There were already signs of strain among industrials, the sector seeing the worst performance with 86 per cent so far having missed expectations.

Among top fallers, chipmaker ASM International fell 6.2 per cent, as its third-quarter order outlook disappointed analysts despite record order intake for the second quarter.

Investors have high expectations for tech firms such as ASM, which have made strong gains this year. The sector is up 14 per cent, the second best performing in Europe.

UniCredit fell 0.4 per cent after it said it had suffered a cyber attack giving unauthorised access to Italian clients' data.

"Cyber attacks are something we need to live with," said Mr Meda.

"It's more positive for cyber security stocks than it is negative for Unicredit."

Swiss pharma company Lonza shot up 7.7 per cent to a record high after a better than expected second quarter and new mid-term targets.

REUTERS