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French stocks hit 9-year high as earnings power European shares

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[LONDON] French blue chips hit a fresh nine-year high on Wednesday, helped by a surge in the shares of luxury group Kering after it reported strong sales, while European regional indexes hovered near a 20-month peak.

The pan-European Stoxx 600 benchmark ended the session up 0.5 per cent as luxury stocks and financials underpinned gains, supported by a wave of earnings results that largely outperformed market expectations.

France's CAC 40 rose 0.2 per cent, building on gains made earlier this week after the investor-friendly centrist Emmanuel Macron progressed to the second round of the French presidential election on May 7. He is tipped to win.

"We have had 25 per cent of companies reporting, and a majority of those have beaten estimates," said Emmanuel Cau, global equity strategist at JP Morgan.

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"Pretty much every single (piece of) eurozone data... has surprised to the upside, and this is driving upgrades." Kering was the top Stoxx gainer, up nearly 10 per cent and hitting an all-time high after surprisingly strong first quarter sales at Gucci and Yves Saint Laurent helped the company beat market forecasts.

"The (Gucci) brand has seen a significant acceleration in performance since the new creative director Alessandro Michele took over with his new collections, which are quite differentiated from the previous collections and from other luxury houses," said Matt Siddle, portfolio manager, Fidelity Funds European Growth.

"They appear to be hitting the zeitgeist at the moment."

Other luxury names across Europe rose on Kering's momentum, with Moncler and Salvatore Ferragamo among top gainers on Italy's blue chip index, and LVMH notching up another record high, up 0.8 per cent.

Shares in carmaker Fiat Chrysler soared more than 9 per cent after reporting an 11 per cent rise in first-quarter operating profit.

Fallers were led by Bic, which plunged more than 10 per cent to a more than two-year low, after its first-quarter net income and sales fell on weak US demand.

French software solutions company Dassault Systemes fell nearly 6 per cent, marking its worst day in six months after it announced single-digit growth in new licenses in its first quarter.

Analysts at Baader Helvea said this disappointed after double-digit growth in new licenses drove the shares higher at the end of 2016.

Credit Suisse, which kicked off much-anticipated results for European banks with plans for a US$4 billion cash call, rose 2.7 per cent, outperforming the regional banking index.

Regional banks supported European gains after Standard Chartered also posted robust results with profit doubling in Q1.

Likewise a 2.3 per cent rise in Deutsche Bank's shares sent Germany's DAX to a record high. The German lender is set to report first quarter numbers on Thursday.

Overall, first-quarter earnings for Stoxx 600 companies were expected to rise 5.5 per cent, according to Thomson Reuters I/B/E/S data. Revenues are expected to increase 5.7 per cent.

That compares to the 11.4 per cent earnings growth expected for top US companies.

REUTERS

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