Europe: Italian banks, tech boost European stocks to 12-week highs

[LONDON] European shares inched up to touch 12-week highs on Wednesday, fuelled by strong gains in Italian banks and tech stocks, while Ubisoft sank following a revenue warning from US videogame maker Electronic Arts.

Europe's STOXX 600 managed a 0.2 per cent gain by the close, having oscillated in and out of negative territory during the day.

The regional benchmark hid wide variations at country level: Germany's trade-sensitive DAX was down 0.4 per cent and France's CAC 40 fell 0.1 per cent while Italy's FTSE MIB jumped 0.8 per cent.

Bank stocks, which began the day as a drag on the market, reversed course to rise thanks to a rally in Italian lenders after a new 30-year Italian bond drew record demand, a positive sign for government bonds.

Intesa Sanpaolo and Unicredit climbed 2.4 and 4.4 per cent, helping drive the banks index up 1 per cent, the top boost to the STOXX.

Strong results from Dutch lender ING also helped lift the mood in bank stocks, which were the worst-performing in Europe last year.

ING shares climbed 6.1 per cent after it reported stronger-than-expected earnings driven by rising interest income and fees.

"ING has reported a strong set of Q4 numbers but we would caution against extrapolating Q4 trends," wrote UBS analysts.

BNP Paribas shares recovered after weak results, ending the day up 1.8 per cent. The French lender reduced its profit target for 2020 and said weak financial markets hit revenues in the final quarter of 2018.

Overall, investors have remained unimpressed with European bank stocks, though.

"We're concerned in this cycle that banks are the value trap - it might be you're waiting for a leg up in bank stocks that never occurs," said James Bateman, chief investment officer of multi asset at Fidelity.

Bank aside, M&A developments also drove some moves.

Alstom shares climbed 4.1 per cent after Brussels rejected the French rail manufacturer's plan to merge with Siemens' rail division, as investors said the decision removed uncertainty and opened the way for potential alternative deals.

German carmaker Daimler fell to the bottom of the DAX, down 1.8 per cent after saying fourth-quarter operating profit fell 22 per cent as trade war and ballooning costs for developing electric and self-driving cars hit profits at Mercedes-Benz autos.

Data on Wednesday showed that German industrial orders fell unexpectedly on weak foreign demand in December, another sign that companies in Europe's largest economy are struggling with a slowing world economy and trade disputes.

That further dented sentiment for Germany's DAX, which lagged the market.

A standout faller was French gaming firm Ubisoft, which sank 9.5 per cent after US videogame maker Electronic Arts cut its revenue outlook due to its newest "Battlefield" title selling about a million fewer units than expected.

Tech stocks hit a 3-month high thanks to strong results from French software company Dassault Systemes , which shot up 10.1 per cent after fourth-quarter revenue topped guidance.

"While the company's outlook for 2019 is slightly below our expectations, we want to highlight that the company has a track record to guide conservatively," said Baader Helvea analyst Knut Woller.

Finnish engineering firm Metso and Swedish industrial technology group Hexagon rose 5.4 and 8.5 per cent after well-received results.

Chipmaker AMS was also a top European gainer, jumping 10.1 per cent and recovering all the ground it lost on Tuesday when results sent it down 6.9 per cent.

REUTERS