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Europe: Strong earnings from ING, BT help shares to two-week high

[MILAN] European shares hit a two-week high on Thursday as strong results from Dutch bank ING and UK telecoms group BT helped offset a disappointing update from Credit Suisse, and ASM International brought some cheer to chipmakers.

The pan-European Stoxx 600 hit a two-week high but then lost steam over the session, ending with a 0.2 per cent gain. Germany's DAX declined 0.1 per cent.

European shares built on Wednesday's rally when fresh optimism over earnings helped ease worries over economic growth and political risk which sent the pan-European index close to two-year lows in October.

Miners, banks and retail - sectors highly sensitive to the economic cycle - led the gains, in a reversal of the pattern during the sell-off, which saw cyclicals underperform.

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Britain's FTSE lagged, down 0.5 per cent, as the pound strengthened after a British official said London was close to sealing a deal that would give UK-based financial services firms basic access to EU markets.

ING shares rose 5.9 per cent after the largest Dutch bank reported a better-than-expected profit of 776 million euros, as it continued to grow on an underlying basis despite being fined for failures to prevent money laundering.

"ING's earnings are mainly boosted by the lower cost/income ratio as its cost cuts seem to start reaping benefits," said Jauke de Jong, a research analyst at AFS Group in Amsterdam.

BT rallied 8.7 per cent after it reported a better-than-expected 2 per cent rise in first-half earnings and nudged its guidance for the full year higher. The stock was on track for its best day since May 2013.

Results from ING and BT lifted the banks and telecoms indexes up 0.9 and 2 per cent respectively, bringing relief to sectors which have been among the worst perfomers so far this year in Europe and have suffered due to their poor earnings outlook.

ASM International rallied 10.9 per cent, its biggest one-day gain since 2009, after issuing a bullish outlook that countered fears of a downturn in the semiconductor market.

Leading the Stoxx were two biotech firms, Morphosys and Argenx, which both surged.

Morphosys jumped 16.3 per cent after it released encouraging results for its leukemia drug MOR 208. Argenx gained 13.4 per cent after new data for its Cusatuzumab drug, also to treat leukemia.

Credit Suisse was a weak spot.

Its shares fell 2.1 per cent after its third-quarter net profit fell short of expectations, even after the bank said it would return to the black in the full year for the first time since Tidjane Thiam became chief executive in 2015.

Oil stocks fell after Shell slightly missed expectations, sending its shares down 3.3 per cent.

Weaker crude prices also weighed on the sector, down 2.6 per cent.

The fall in fuel prices helped airlines outperform, however, with Lufthansa leading the DAX with a 7.1 per cent rise and Air France also up strongly.

The travel and leisure sector - a laggard this year - had its best day since June 2016, up 2.6 per cent.

Getinge shares fell 7.9 per cent after the US Food & Drug Administration said it was evaluating recent reports of Getinge's intra-aortic balloon pump devices shutting down while running on battery power. 

Shares in seismic oil services firm TGS dived 9.8 per cent to their lowest since early May after its third quarter operating profit fell more than expected.

Wacker Chemie gained 9.6 per cent, with analysts saying the highly-shorted chemicals stock was benefiting from a NordLB upgrade to "buy".

Overall, European earnings are expected to have risen 14.2 per cent in the third quarter, up from a previous forecast of less than 13 per cent, according to IBES Refinitiv data.

By the end of the week, companies representing around 40 per cent of the Stoxx 600's market cap will have reported quarterly results.

REUTERS