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Europe: Stocks make their way back to the black


[LONDON] European shares rose on Tuesday and made their way back to positive territory for 2018 as investors cheered UniCredit results, oil prices boosted energy groups and a positive open on Wall Street lifted sentiment.

The Stoxx 600 closed up 0.56 per cent at 390.83 points, a 0.42 per cent gain on the year. The pan-European index however still remain 13 points below its January peak of 403.72 points.

On Wall Street, the S&P 500, up about 7 per cent year-to-date, within a percentage point of its January all time high.

Analysts believe a breach and close above that level could confirm a continued bull market.

"With the S&P 500 trading just 0.5 per cent away from record highs, we have seen markets look past the instability of global trade and instead focus on the continually improving earnings picture", commented Joshua Mahony, a market analyst at IG.

UniCredit shares rose 2.9 per cent after Italy's biggest lender by assets reported second-quarter profits fell less than expected.

"Trend of under-promising and over-delivering continues," wrote Jefferies analysts in a note.

Commerzbank shares fell 1.5 per cent to the bottom of Germany's DAX, however, as investors reacted badly to a weaker-than-expected capital buffer, and its forecast of higher costs for its full year of 2018.

"We think investors will be disappointed by the revised cost guidance, as this is the main element in management's control, but note that expectations are already incredibly low for Commerzbank," Citi analysts wrote.

Overall the banking sector index rose 0.7 per cent.

Energy stocks, up 1.6 per cent, also contributed to lift the broader index with majors Royal Dutch Shell and Total up 1.4 per cent and 1.8 per cent respectively.

Oil prices are on the rise after US sanctions on Iranian goods went into effect, intensifying concerns that sanctions on Iranian oil, expected in November, could cause supply shortages.

Earnings publications also triggered sharp moves during the session.

The biggest disappointment came from Danish jewellery maker Pandora, which sank 24.2 per cent to a four-year low after cutting its sales and profit margin guidance for this year and announcing nearly 400 job cuts.

"Another profit warning just a few months after the updated mid-term targets may put the credibility of the current strategy and management team in question," said Berenberg analysts, warning of a likely "free-fall" in the stock today.

Pandora is suffering from fewer people visiting shopping malls in its key US market.

A downgrade by Credit Suisse to "underperform" bruised shares in French IT services firm Atos, down 10.4 per cent.

Analysts at the Swiss broker said "financial arrangements" account for around 30 per cent of recent free cash flow and the majority of the recent improvement in cash flow.

Europe's biggest pure online fashion retailer Zalando fell 5.6 per cent after it trimmed its sales and profit outlook for the year, following results that missed expectations.


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