European shares rebounded yesterday when bullish company earnings updates lifted some of the politics-driven gloom over equity markets.
Globally I don’t think there’s doubt that companies are in rude health
The FTSEurofirst closed up 10.74 points, or 1.1 per cent at 1,032.50, led by a bounce in some of the previous session’s biggest fallers such as banks, after the index hit a three-month low on Monday when political uncertainty and disappointing economic data revived concerns over the euro zone.
Yesterday, however, big companies boasting bullish updates such as Michelin helped bring some respite to beaten down markets.
“Globally I don’t think there’s any doubt that companies are in rude health. That’s reflected in strong earnings, in high levels of margins and in very strong balance sheets,” Bill Dinning, head of strategy at Kames Capital, said.
In the current quarter, of the companies that have reported globally 67 per cent have so far beaten or met earnings expectations, according to Thomson Reuters Starmine data.
French firm Michelin, the world’s second-biggest tyre maker, gained 6.1 per cent after confirming its goal for stable sales volumes over the full year and issuing an upbeat outlook.
Dutch telecom group KPN added 3.7 per cent as it confirmed the outlook for the whole year, despite a 13 per cent decline in first-quarter core profit.
ARM, the British company whose technology powers Apple’s iPad, met market expectations with a 22 per cent rise in first-quarter profit, but concerns over chip supply, lack of upgrades and Apple‘s results due after the market close depressed the share price.
Chemicals and plastics firm Solvay climbed 3.7 per cent as it said trading picked up over the first quarter and forecast profits should rise by half in four years as it focuses on better performing divisions and makes bolt-on acquisitions.
M&A continued to drive equities as cash rich companies look to buy cheap assets to bolster earnings against a tough economic backdrop.
TeliaSonera rose 6.6 per cent as the Nordic telecoms firm unveiled plans to sell part of its stake in Russian phone operator MegaFon, which will also pay a dividend to all shareholders. British outsourcing group Capita, increasingly reliant on acquisitions for growth, fell 6.4 per cent as it raised £274 million ($441 million) selling new shares to boost its war chest.
Broker guidance left UK tobacco firms BAT and Imperial Tobacco (IMT) nursing losses of up to 1.8 per centBofA Merrill Lynch downgraded its ratings for both to “neutral” from “outperform” and reduced target prices in a sector review, citing valuation grounds.