Europe: Shares climb on earnings cheer, GDP data; Stoxx logs best month since Nov 2020

EUROPEAN shares rose on Friday (Jul 29) and logged their first monthly gain in 4 as a host of strong earnings from corporate Europe overshadowed fears of a global recession, with some strong economic data also lending support.

The pan-European Stoxx 600 was up 1.3 per cent to a near 2-month high and logged its best monthly performance since November 2020.

Boosting sentiment, the euro zone economy grew much faster than expected in the second quarter, with gross domestic product rising 0.7 per cent quarter-on-quarter in the April-June period for a 4.0 per cent year-on-year gain, strongly beating expectations of a 0.2 per cent quarterly and 3.4 per cent annual gain.

However, inflation rose to another record high in July, with consumer price growth accelerating to 8.9 per cent in the month from 8.6 per cent a month earlier, far above expectations for 8.6 per cent and well clear of the ECB's 2 per cent target.

"The picture still looks patchy, with uneven dynamics in terms of consumption and investment - we still expect a material deterioration in the outlook in Q3 and a mildly negative print in Q4," wrote Morgan Stanley economists and strategists in a note.

"Underlying inflationary pressure remains strong and we expect further increases in the coming months... We see mounting headwinds from slowing growth and falling input cost pressures."

Meanwhile, data on Thursday showed the US economy shrank for a second straight quarter.

Worries about a recession have led to scaled down bets of central bank policy tightening, with money markets now pricing in a roughly 44 per cent chance of a 50 basis-point hike by the ECB in September, compared with a 50 per cent chance earlier this week.

Oil stocks led gains after crude prices jumped more than US$4 a barrel as attention turned to next week's Opec+ meeting, while bank stocks jumped 1.6 per cent, with British lender NatWest climbing 8.1 per cent after raising its full-year revenue outlook.

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Europe: Stocks start the day higher

Luxury stocks got a boost from strong quarterly sales growth at Hermes and L'Oreal. Shares of the Birkin bag maker gained 7.5 per cent, while those of the cosmetics group added 3.8 per cent.

Among other stocks, France's BNP Paribas and Spain's BBVA gained 2.9 per cent and 6.0 per cent, respectively, as the lenders reported better-than-expected quarterly profits.

Signify fell 11.8 per cent after the world's biggest maker of lights said its profit margins would decline this year.

Carmaker Renault rose 5.1 per cent after upgrading its full-year outlook, saying its turnaround plan to improve profitability was delivering results ahead of schedule. REUTERS