Europe: SAP, LVMH earnings nudge stocks higher; German shares lag

[BENGALURU] European stocks rose on Wednesday on upbeat earnings from software firm SAP and French luxury goods maker LVMH, while German shares lagged after sources said the country's economic institutes cut 2021 GDP forecast.

The pan-European Stoxx 600 index rose 0.2 per cent, closing just 0.2 per cent shy of record highs, as an impressive bounce-back in sales saw LVMH scale a record highs, spurring gains in other luxury names.

Germany's DAX index ended 0.2 per cent lower. Economic institutes will cut their joint 2021 growth forecast for Europe's largest economy to 3.7 per cent from 4.7 per cent, sources said, due to a longer than expected Covid-19 lockdown.

Data earlier in the day showed euro zone industrial output declined as anticipated in February, including in Germany, dampening prospects for economic growth in the first quarter.

"But underlying demand is strong and that makes us upbeat about prospects for the bloc as it reopens later in the year,"said Bert Colijn, senior economist, eurozone at ING.

Germany's SAP jumped 1.1 per cent as it raised 2021 revenue outlook higher after reporting a quarterly rise in cloud sales.

Upbeat results from big US banks JPMorgan Chase, Goldman Sachs and Wells Fargo also boosted sentiment.

Earnings helped offset concerns about a potential setback to the Europe's Covid-19 vaccination programme after Johnson & Johnson said it would delay rolling out its vaccine in Europe.

European stocks have notched all-time highs in recent days on hopes of a strong quarterly reporting season, as well as a rapid recovery in the global economy despite a resurgent Covid-19 pandemic.

"The economic rebound may not be as robust as expected if consumers continue to play it safe after an initial bout of revelling, which could bring company profits in below expectations, and moderate demand for riskier areas of the market," said Laith Khalaf, financial analyst at AJ Bell.

"While investors shouldn't ignore these downside scenarios, the central case remains a gradual reopening of the global economy as vaccines steadily bring the pandemic under control."

Earnings for companies listed on the Stoxx 600 are expected to jump 55.7 per cent in the first quarter, according to Refinitiv IBES data, more than the 47.4 per cent rise forecast a week earlier.

Britain's biggest retailer Tesco fell 2 per cent after reporting a 20 per cent drop in full-year pretax profit, while British airline easyJet rose 5.8 per cent after saying it expected to start to fly more from late May.

Miners gained after Goldman Sachs painted a robust outlook for copper miners, adding there is potential for re-rating stocks higher as investors increasingly seek exposure in the red metal.

REUTERS