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Reopening optimism keeps European stocks near all-time highs

By Reuters

By Sruthi Shankar

(Reuters) -European stocks neared record highs on Tuesday on optimism around several countries easing economic restrictions, falling unemployment rate in the United Kingdom and strong earnings reports from companies.

The pan-European STOXX 600 index rose 0.5%, trading just shy of its record high hit last week, with economy-linked cyclical sectors like miners, oil and gas and automakers leading the gains.

The German DAX hit a record high in early trading and Italy’s FTSEMIB added 0.9% to fresh pre-pandemic levels.

Inflation worries due to a rally in commodity prices, unprecedented fiscal and monetary policy support as well as supply chain issues have raised fears of central banks dialling back support, sparking volatility in global stocks last week.

“Should we have inflation globally, then cyclical stocks see better performance normally than growth stocks,” UniCredit strategist Christian Stocker said.

“The weight of cyclical stocks is much higher in Europe and from a relative point of view, it is an advantage for European equities.”

UK stocks cheered data that showed Britain’s unemployment rate fell more than expected to 4.8% in the first quarter when the country was under a tight lockdown, while hiring rose further in April. [.L]

As the earnings season draws to a close, analysts expect profit for STOXX 600 companies to jump 90.2% in the first quarter and 93.4% in the second, as per Refinitiv IBES data.

The world’s biggest maker of hearing aids Sonova Holding surged 7.9% after predicting strong growth this year due to a market recovery and new products.

Winston cigarettes maker Imperial Brands rose 1.3% after it reiterated its full-year outlook.

Telecoms took a hit as Vodafone fell 6.7% after the UK mobile operator reported a 1.2% drop in full-year adjusted earnings as COVID-19 hit roaming revenue and handset sales.

French telecoms group Iliad slumped 9.6% after saying it would revise down a key cash flow target as it steps up spending on 5G networks.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur)