Europe: Miners power shares as earnings season gathers pace

[LONDON] European shares rose to fresh seven-week highs on Wednesday, helped by well-received company results and a rally in mining stocks on the back of soaring metal prices.

The pan-European Stoxx 600 benchmark index gained 0.3 per cent, with a rise among more cyclical sectors contributing the most to gains. The FTSE rose 1.3 per cent.

The basic materials index, which tracks big miners like Glencore, rose 4.4 per cent, its biggest one-day gain since the US presidential election in November 2016.

Metal prices rose across the board. Nickel clocked its largest one-day gain since the financial crisis on what analysts said were misplaced concerns that the metal would become ensnared in US sanctions on Russian companies.

In the sector, Russian precious metals miner Polymetal , whose shares have been hit by concerns over US sanctions, rose 12 per cent after saying its first-quarter revenue climbed 19 per cent year-on-year.

Glencore rose 7.7 percent, Aurubis added 6.6 per cent, while Rio Tinto advanced 5.4 per cent.

Company updates were broadly rewarded with a bounce in shares, as French food group Danone rose 1.5 per cent after its first-quarter sales beat forecasts on the back of strong demand for baby food in China.

Private healthcare provider Mediclinic rose 9.2 per cent after a full-year update, while Dutch oil and chemical storage company Vopak gained 6.9 per cent after saying it had the potential to improve earnings significantly in 2019.

While the European first-quarter earnings season is not expected to be quite as stellar as in the United States, year-on-year earnings growth for the MSCI EMU (European Economic and Monetary Union) is expected to be around 16 per cent in dollar terms, according to Thomson Reuters I/B/E/S data.

"(The earnings season) is going pretty well in Europe, just not quite at the same pace as the US ... the US are just a couple of steps ahead in terms of their movement through the economic cycle," Jasper Lawler, head of research at London Capital Group, said.

"We're looking actually at the next set of few quarters of growth, earnings acceleration probably, whereas in the US ... the growth is probably going in the other direction," Mr Lawler added.

Still in earnings, however, German auto supplier Continental AG lowered its full year outlook after exchange rate and inventory valuation effects resulted in a 150 million euros hit in the first half of 2018. Its shares fell 4 per cent.

Elsewhere, British property company Hammerson withdrew its recommendation that shareholders back a merger with smaller rival Intu Properties.

"Retail businesses are already struggling with higher business rates as well as declining footfall so today's news that Hammerson is pulling out of its ... bid for its rival Intu Properties is quite a sensible move," Michael Hewson, chief market analyst at CMC Markets UK, said in a note.

Shares in Hammerson rose 4.1 per cent, while Intu Properties fell 4 per cent, placing it among the worst-performing stocks on the Stoxx 600.

Last week, France's Klepierre walked away from a bid for Hammerson, saying the British firm failed to provide"meaningful engagement" over a potential deal.

Italy's FTSE MIB index added 0.5 per cent after Italian President Sergio Mattarella asked Senate speaker Maria Casellati to meet with bickering political parties to see if a government could be formed following inconclusive elections six weeks ago.

REUTERS