Europe: Shares end higher on earnings optimism, US rate cut hopes
EUROPEAN shares closed higher on Tuesday, buoyed by better-than-expected corporate earnings and renewed optimism that the Federal Reserve may cut interest rates next month.
The pan-European Stoxx 600 index edged up 0.15 per cent to 541.40, with most regional bourses also trading in the green.
Earnings season, in full swing, offered some relief for investors concerned about the impact of trade uncertainty on corporate performance.
Diageo gained 4.9 per cent after the world’s biggest spirits maker forecast flat 2026 sales despite US tariffs and upped its cost-savings target.
The stock boosted the food & beverage index by 1.2 per cent, making it the day’s top performing sector.
German chipmaker Infineon gained 4.6 per cent after it slightly raised
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its full-year profit outlook and noted the start of a global semiconductor market recovery despite lingering tariff concerns.
BP said it will review how best to develop and monetise oil and gas production assets and consider more cost cuts to boost shareholder returns after beating second-quarter profit expectations, which sent its shares up 2.8 per cent.
“The market has learned to adjust to the reality of tariffs quite well,” said Chris Beauchamp, chief market analyst at IG Group.
This earnings season is the first to reveal the corporate health impact from US President Donald Trump’s tariff-fuelled trade war. Following the EU-US trade deal, analysts have raised their second-quarter earnings growth estimates.
Following a solid performance in the first half of the year, analysts have highlighted that sentiment towards US stocks has been improving over European names, with the Stoxx 600 now underperforming the US S&P 500.
“The strength in the US is returning quite dramatically,” Beauchamp said. “But we’re still saying that there are plenty of interesting opportunities in Europe as you’ve good-quality companies with earnings growth still there. It may be a little bit beaten down, but there is still enough to like about Europe.”
Also helping the mood globally were expectations that the US Federal Reserve will lower interest rates faster than previously expected following soft US nonfarm payrolls data last week.
Rate-sensitive bank stocks shed 0.3 per cent in tandem with falling euro zone yields.
Smith+Nephew jumped 15.3 per cent after the British medical products maker posted a rise in first-half profit and announced a new US$500 million share buyback for the rest of the year.
Novo Nordisk shares dropped 2.3 per cent after UBS downgraded the stock to “neutral” from “buy”, citing several challenges to the company’s growth.
The company is expected to report quarterly results this week. Its shares lost 32 per cent last week after it slashed its 2025 forecast and named an insider as new CEO.
Meanwhile, a survey showed that euro zone business activity grew slightly faster in July than in June, although demand remained subdued. REUTERS
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