Hopes for a dovish ECB and corporate earnings boost European stocks By Reuters

Hopes for a dovish ECB and corporate earnings boost European stocks By Reuters

Hopes for a dovish ECB and corporate earnings boost European stocks By Reuters

© Reuters. The DAX chart of the German Stock Price Index is displayed on the Frankfurt Stock Exchange, Germany, on July 19, 2021. REUTERS / Staff

By Sruthi Shankar

(Reuters) – European equities extended their gains for a third session on Thursday, signals of a strong corporate earnings season and expectations that the European Central Bank (ECB) will maintain a dovish stance raised demand for venture stocks.

The pan-European was up 0.7%, fully recovering from its worst selloff in 2021 earlier this week.

Travel and leisure stocks once again outpaced industry gains, up 2.9%. The index had hit a five-month low on Monday on fears about the growing spread of the Delta variant.

In earnings-driven moves, Sweden-based private equity firm EQT (NYSE 🙂 jumped 11.9% to the top of STOXX 600 after reporting upbeat earnings in the first half, while the Swiss engineering ABB reached its highest level since November 2007 after doubling its annual sales outlook.

“Right now, it’s less about a huge stock drawdown. It’s more about individual stocks and real stock selection,” said David Haynal, portfolio manager at Eric Sturdza Investments.

“This earnings season will be important to judge that.”

Consumer goods giant Unilever (NYSE 🙂 Plc fell 4.4% after it slashed its full-year operating margin forecast due to rising raw material costs.

Of the 600 STOXX companies that have reported so far, 61% have exceeded analyst earnings expectations, according to Refinitiv IBES data. Typically 51% beats forecast earnings.

The benchmark STOXX 600 index hit record highs last week on optimism about a strong recovery in economic growth and earnings. However, markets have recently become volatile due to concerns about higher inflation and a resurgence of virus cases.

Eurozone stocks rose 1% ahead of the ECB’s policy decision, scheduled for 1145 GMT, when it almost certainly promises an even longer period of stimulus to meet its pledge to boost inflation.

The ECB released an adjusted inflation target earlier this month that could attempt to temporarily push inflation above its 2% target after a decade of mistakes.

“The question will be whether the ECB is going beyond what the markets already expect: the fall in bond yields and the weakening of the euro in recent weeks suggest that the price is already in some ECB relaxation,” Paul said. Jackson, Invesco’s global director of asset allocation research. he said in a note.

France’s Publicis jumped 3.5% after forecasting that its finances would fully return to pre-pandemic levels this year.

Italy’s Monte dei Paschi rose 5.7% after the lender and its former main investor reached a preliminary agreement to resolve their legal disputes.

Chart: Euro Area PE Ratio and Inflation Expectations – https://fingfx.thomsonreuters.com/gfx/mkt/klvykegeyvg/Pasted%20image%201626942246681.png

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