Robust earnings support European shares; eyes on BoE rate decision

Robust earnings support European shares; eyes on BoE rate decision

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, August 3, 2022. — Reuters pic

Thursday, 04 Aug 2022 5:12 PM MYT

LONDON, Aug 4 — European shares rose today following strong results from a slew of companies, with focus squarely on Britain’s central bank that is expected to lift interest rates by the most since 1995.

The pan-European STOXX 600 index gained 0.3 per cent, with Germany’s DAX up 0.7 per cent.

The Bank of England is expected to lift borrowing costs by a bigger 50 basis points to 1.75 per cent, according to a Reuters poll, as it battles inflation running at a four-decade high.

“There has been a pattern in recent meetings, like the Reserve Bank of Australia this week, where central banks have struggled to convince markets they are going to follow through with hikes that have been priced in,” Jonas Goltermann, senior economist at Capital Economics, said.

“Because the stock market was so beat up going into the earnings season, there’s been a degree of relief that earnings have been bad, but not awful.” British retailer Next climbed 3 per cent on raising its full-year sales and profit forecasts. The retail sector jumped 2.7 per cent, boosting the European benchmark index.

Credit Agricole rose 4.5 per cent as it joined French lenders BNP Paribas and Societe Generale in announcing a better-than-expected quarterly profit amid record activity at its investment banking division.

European banks advanced 0.3 per cent, but gains were capped by a 2.8 per cent drop in the Netherlands’ ING Groep NV even as it posted a better-than-expected quarterly pre-tax profit.

“ING beats expectations, but results difficult to read with Turkey hyperinflation impact,” Jefferies analysts said in a note, adding that the bank’s fees and costs were a slight miss.

Lufthansa rose 4.8 per cent as it said it expects a return to group operating profit for the full year.

However, the German airline warned it would offer only around 80 per cent of “pre-crisis” passenger capacity in the third quarter, less than previously planned, amid staffing shortages at airports and airlines.

Ice cream maker Ben & Jerry’s independent board said parent company Unilever, with which it is locked in a dispute over the sale of its Israeli business, had frozen its directors’ salaries in July as a pressure tactic ahead of a mediation on the matter. Unilever’s shares fell 1.5 per cent. — Reuters