Europe: Stocks end flat between earnings optimism, Federal Reserve caution

[BENGALURU] European stocks ended flat on Wednesday as optimism over a swathe of positive bank earnings was offset by caution setting in before the US Federal Reserve's policy decision.

The pan-European Stoxx 600 index ended largely unchanged, with bank stocks leading gains among the regional sectors. The subindex ended 1.5 per cent higher.

Deutsche Bank jumped 10.7 per cent to the top of the Stoxx 600, as strength at its investment bank helped the German lender post a better-than-expected first-quarter net profit.

Spanish bank Santander rose 2.7 per cent after it beat first-quarter forecasts with its profit, while not adding to provisions for the pandemic and booking record US earnings.

Lloyds Banking Group also rose 3.5 per cent after reporting a better-than-expected profit, while Swedish bank SEB marked small gains on a profit beat.

"At a market level, Europe has performed strongly year-to-date and it's clear that there has been an anticipation that the recovery will be quite sharp and strong," said Tom Dorner, investment director for European equities at Aberdeen Standard Investments. "You're still seeing a rotation in the market in favour of the more cyclical names like banks and autos."

The buying into cyclicals has seen travel and leisure , automobiles, basic resources and banks among the top performing euro zone sectors this year.

Earnings at European companies in the first quarter of 2021 are expected to surge 71.3 per cent from a year earlier, according to Refinitiv IBES data, up from last week's forecast of a 61.2 per cent jump.

The world's biggest advertising company WPP jumped 4.3 per cent to the top of the FTSE 100 on returning to underlying growth in the first quarter, as clients launched new products and brands.

German food delivery company Delivery Hero surged 9.4 per cent, after it forecast revenues to more than double in 2021.

Among decliners, Lysol maker Reckitt Benckiser Group fell 3.9 per cent, even as the company backed its full-year outlook.

Italian energy service group Saipem fell 5.1 per cent after it missed quarterly profit estimates and flagged uncertainty over a Mozambique project.

Swedish communications provider Sinch AB tumbled 10.8 per cent to the bottom of the Stoxx 600 despite a rise in first-quarter profit, as it said that some of its sectors were still under pressure from the pandemic.

REUTERS