Europe: Luxury goods, mining gains help shares regain lost ground

[BENGALURU] European shares ended higher on Wednesday as positive earnings from the luxury goods sector and strong commodity prices helped investors momentarily look past concerns over rising interest rates.

The pan-European Stoxx 600 index ended 0.2 per cent up after falling 1 per cent in the prior session.

Mining stocks were the best performers for the day, up 2.7 per cent as iron ore prices surged on signs of more stimulus in major importer China.

The Stoxx 600 had hit a one-week low in the previous session, as rising bond yields slammed heavyweight technology stocks on both sides of the Atlantic.

Broader equity markets had also wilted on the prospect of an end to pandemic-era monetary policy, which had flushed the market with cash and driven stocks to record highs.

US Treasury yields held near two-year highs, while the German 10-year yield rose above 0 per cent for the first time since May 2019 as investors braced for tighter US monetary policy, with the European Central Bank also expected to follow suit.

Investors are pricing in a much faster rate-hike cycle in the United States, while concerns persist over the pandemic's impact on supply chains, said Philipp Lisibach, chief global strategist at Credit Suisse.

Economists polled by Reuters also expect euro zone inflation to burn hotter throughout 2022.

"Fourth-quarter earnings are going to be decent, but it'll be important to understand how companies cope with higher input prices, particularly energy prices and wages," Lisibach said.

Stoxx 600 companies are expected to post a 48.6 per cent year-on-year rise in fourth-quarter profit to 109 billion euros (S$166.6 billion), a marginal uptick from a prior estimate of 48.5 per cent, Refinitiv data showed.

Retail stocks jumped 1.7 per cent and personal and household stocks added 2.2 pre cent on Wednesday after a slew of encouraging earnings.

British luxury brand Burberry gained 6.3 per cent after saying full-price sales accelerated in the third quarter thanks to outerwear and leather goods as well as material improvement in Asia and Europe.

Cartier owner Richemont climbed 5.2 per cent as the world's second-largest luxury group said robust demand for its jewellery and watches in the Americas and Europe helped quarterly sales rise by nearly a third.

Other luxury stocks including LVMH, Kering and Hermes rose between 1.6 per cent to 3.7 per cent, lifting France's blue-chip CAC 40 index.

ASML Holding NV fell 2.4 per cent despite posting strong results, as the chipmaker said it has still not received permission to ship any of its most cutting edge lithography systems to China.

REUTERS