Europe: Shares end higher as focus shifts to central bank meetings

EUROPEAN shares ended higher on Friday (Jan 27) as investors assessed mixed earnings from the region, while easing inflation in the US bolstered sentiment ahead of a week of major central bank decisions.

The pan-European Stoxx 600 climbed for the second straight day, adding 0.2 per cent, and posted weekly gains.

H&M fell 4 per cent as the world’s second-biggest fashion retailer reported a much larger-than-expected drop in operating profit for the September-to-November period.

Remy Cointreau slipped 3.7 per cent after the French spirits maker posted lower third-quarter sales.

“The earnings angle is a mixed bag. Some corporates appear to show earnings holding up, while others are reporting disappointing numbers,” Stuart Cole, head macro economist at Equiti Capital in London, said.

On a brighter note, shares of luxury firms such as Compagnie Financiere Richemont and Moncler rose between 1 and 2.4 per cent after LVMH posted forecast-beating quarterly sales on strong US and European demand.

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The upcoming week is marked by monetary policy decisions from prominent central banks, including the Federal Reserve and the European Central Bank (ECB).

Data on Friday showing a fall in consumer spending and further easing in inflationary pressures in the US bolstered hopes of a 25-basis-point rate hike from the Fed next week, with traders betting the central bank would end its hiking campaign in March.

“With the Fed so far showing no signs that it is prepared to consider easing the tightening in policy being applied, only that the pace it is applied at may slow, a quarter of flat, or even negative growth, in Q1 is looking increasingly likely,” Cole said.

The Stoxx 600 has rallied around 7 per cent this month, boosted by hopes that major central banks would slow their aggressive interest rate hike campaigns.

Among major Stoxx 600 sectors on Friday, energy and consumer discretionary firms were a big boost, while weakness in consumer staples stocks such as Diageo limited gains on the index.

Rate-sensitive banks rose 0.6 per cent with Europe’s top lenders such as Italy’s UniCredit to report results in the coming days.

Italy’s banking-heavy stock index rose 0.8 per cent to hit a near one-year high.

Earnings for Stoxx 600 companies are expected to have increased 9.5 per cent on an annual basis in the fourth quarter, down from 14.5 per cent seen at the start of January, Refinitiv data showed.

Among other stocks, SSAB gained 10 per cent as the Swedish steelmaker announced higher dividend and proposed stock buyback.

Signify advanced 5.6 per cent after the world’s largest lighting maker gave a more upbeat forecast for operating profitability for 2023. REUTERS