Europe: Shares gain on earnings relief, but still log worst month in a year

EUROPEAN shares climbed on Tuesday, with investors drawing comfort from a slew of corporate earnings beat, but the benchmark index still ended October sharply lower on concerns about economic growth and interest rates staying higher for longer.

The pan-European Stoxx 600 closed 0.6 per cent higher but still posted its worst monthly performance since September 2022.

The benchmark index logged its third straight monthly decline, down nearly 3.7 per cent during the period.

“I’m not reading too much into today’s gains, as to some degree, it’s kind of making up for lost ground,” said Michael Field, European equity strategist at Morningstar.

“We’re back in that place where equities aren’t expensive, but they’re not cheap either. Unless the economic picture changes to the positive, there’s no reason why equity markets should rally strongly into the year-end.”

Euro zone economic growth was weaker than expected in the third quarter, a flash estimate showed, with gross domestic product contracting slightly quarter-on-quarter and the year-on-year growth rate slowing sharply.

German retail sales fell in September due to persistently high inflation.

Investor focus turned to central bank decisions by the US and UK later this week.

For the day, real estate was the top sector performer with a 2.7 per cent advance, with Belgian healthcare real estate investment firm Aedifica jumping 5.0 per cent after raising full-year earnings outlook.

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The chemicals sector rose 1.7 per cent as Germany’s BASF added 4.5 per cent despite a drop in third-quarter core earnings and a downgrade in its full-year guidance as markets feared worse results.

The energy sector was the worst hit due to a 4.6 per cent fall in BP after third-quarter earnings missed analysts’ forecasts.

Engineering group Wartsila was the top gainer on the Stoxx 600, up 15.4 per cent, after beating third-quarter result estimates and a positive outlook surprise.

Germany’s Uniper, which was bailed out during Europe’s energy crisis, jumped 9.5 per cent after swinging to a nine-month net profit.

Siemens Energy slipped 0.8 per cent after sources said the company is considering selling a part of its 24 per cent stake in Indian-listed Siemens to former parent Siemens AG to shore up its balance sheet. Siemens AG shares gained 1.0 per cent.

Of the 158 companies in the Stoxx 600 that have reported earnings to date, 57.6 per cent beat analyst estimates, according to LSEG data.

Meanwhile, Rolls Royce gained 6.6 per cent on a ratings upgrade by Barclays. REUTERS