Europe: Shares start November on a two-year high

[LONDON] European stocks hit a two-year peak on Wednesday, lifted by resilient company earnings and record highs in world stocks, though a slump in Standard Chartered shares kept the banking sector under a cloud.

The pan-European Stoxx 600 ended up 0.4 per cent after rising earlier in the session by as much as 0.7 per cent to 398.05 points, a level last seen in August 2015.

Some of that was down to Germany's DAX index which, playing catch-up after Tuesday's holiday, jumped 1.8 per cent to a fresh record high, scoring its biggest one-day gain in more than six months.

Markets continued to brush off concerns over Catalonia's independence bid, although Spain's IBEX underperformed with a decline of 0.2 per cent.

The European benchmark is enjoying its fifth straight day of gains and rose almost 2 per cent in October, having also taken a cue from global markets which have been propelled higher by hopes of US tax cuts, economic recovery and a robust tech cycle.

"Economically everything looks good at the moment," said Jonathan Bell, chief investment officer at Stanhope Capital.

Bell cautioned, however, that while investors were riding the rising wave, markets could be vulnerable to monetary policy changes.

The day's top performer was British drugmaker Indivior which soared more than 8 per cent after US authorities recommended approval for an opioid addiction drug. The stock has risen about 24 per cent already this week.

"On our view (the recommendation) substantially increases the probability of approval ... which is material given its importance to future growth prospects," analysts at Jefferies said in a note to clients, rating the stock a Buy.

Fellow drugmaker, Denmark's Novo Nordisk gained 0.3 per cent, after falling earlier on the back of a cautious outlook for next year.

The company forecast only muted growth in 2018 and warned that draft legislation in some US states to make pricing more transparent could impact business in its largest market.

On the DAX, Volkswagen rose 4.8 per cent, wiping off losses it suffered since a diesel emissions scandal hit the carmaker more than two years ago.

Still on the earnings front, Lundin Petroleum rallied 5.8 per cent after the Swedish oil company said it will consider paying early dividends as stronger oil prices and higher output lifted quarterly earnings to a record.

Bookmaker Paddy Power rose 5.2 per cent after the company improved its outlook for full-year core profits.

Of the Stoxx600 firms which have reported third quarter results, almost half have beaten forecasts, according to Thomson Reuters I/B/E/S, which also predicts average earnings to increase 3.5 per cent over the same 2016 quarter.

But the latest earnings season has rekindled some worries for Europe's banking sector.

While BNP Paribas shares extended the previous day's 2.7 per cent fall due to disappointment in its fixed income trading operations, Standard Chartered was Wednesday's biggest bank loser, down 6.1 per cent.

While the Asia-focused lender posted a 78 per cent rise in pre-tax profit, this was overshadowed by higher expenses and flat revenues, dashing investors' hopes for dividend payments .

Also bringing up the bottom of the index was British clothing retailer Next which sank 9 per cent after results fell short of analysts' expectations.

REUTERS