Thursday, May 19

European Shares Gain on Busy Earnings Day, Trimming Monthly Drop

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(Bloomberg) — European stocks advanced for a second day, trimming its monthly decline, as investors monitor a busy earnings day to gauge the companies’ ability to overcome inflationary and policy risks.

The Stoxx Europe 600 Index was 0.8% higher by 8:04 am in London, with travel and leisure and technology sectors outperforming.

TotalEnergies SE advanced after posting a threefold increase in first-quarter adjusted profit and expanded its share buybacks. Glencore Plc gained as trading business is headed for another year of bumper profits. Capgemini SE rose after an earnings beat.

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European equities have been under pressure in April and this year on concerns about the hawkish turn in central bank policies and as the war in Ukraine fuels inflation and energy crunch worries. Investors have been monitoring Europe’s busiest reporting week so far this year, with Thursday set to be particularly lively as almost 70 companies publish results.

According to Sanford C. Bernstein strategists, the European earnings season is “robust” so far, with about 61% of the companies that have reported so far having beaten estimates, while first-quarter earnings have grown by 4.5% year-on-year . Energy, healthcare, staples and materials are seeing the strongest positive revisions, while banks and telecoms are seeing the most negative revisions, according to Bernstein strategists led by Sarah McCarthy.

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“All eyes are on corporate results this week, which are generally strong as corporates are able to pass higher costs to consumers and the demand remains high. The guidance and margins are key as we navigate through very convulsive geopolitical and macro times,” said Pablo Gonzalez, equities portfolio manager at Mapfre AM. “Concerns remain around central banks’ moves, China lockdowns and the war, with energy risks in Europe increasing.”

The Spanish asset manager maintains a defensive position on equities as it monitors economic and geopolitical risks.

In geopolitical developments, European Union members pushed the bloc to deliver clearer guidance over Russia’s demand for natural gas payments to be made in rubles, after flows to Poland and Bulgaria were cut off. Germany signaled it’s open to a phased-in ban on Russian oil imports.

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