European equities climbed to a 5.5-year high yesterday boosted by a string of strong corporate updates, with the rally only slightly dented by much weaker-than-expected US jobs data.
The world’s biggest economy added only 74,000 non-farm jobs in December: a third fewer than even the most conservative analyst forecast.
But markets were consoled by the temporary negative impact from cold weather, as well as by the fact that any signs of economic weakness would likely reduce the pace at which the US Federal Reserve scales back its equity-friendly stimulus.
“In the US, the bad news is still good news for equities because it does at first glance – which is how I think the markets have taken it – suggest tapering is less likely,” said Coutts strategist James Butterfill.
“But also... a lot of other macro data is quite positive and it supports the idea that this is a temporary blip caused by the weather rather than something more ominous in the US economy.”
The FTSEurofirst 300 closed up 0.4 per cent at 1,321.16 points, knocked off a 5.5-year peak of 1,328.31 by the US data but still firmly in positive territory.
Deutsche Lufthansa led the gainers up 8.9 per cent in more than three times average daily volumes after reporting a rise in Dec-ember passenger traffic and forecasting a shrinking 2014 fuel bill.
Swatch offered more good news to investors scrutinising trading updates for clues on the likely strength of the European fourth-quarter earnings season, which kicks off in coming weeks.
Shares in the world’s largest watchmaker added 3.9 per cent after it reported rising sales and forecast double-digit 2014 growth, easing concerns of a downturn in export destination China.
The news cheered the rest of the luxury sector, with Richemont, the maker of Cartier jewellery and IWC watches, up 4.0 percent and British luxury brand Burberry up 3.7 per cent.
Italy’s Luxottica, the world’s top premium eyewear maker by sales, gained two per cent.
“Luxury goods will be in demand this year as an improving economic outlook in developed markets is also good for emerging markets,” said Didier Duret, chief investment officer at ABN-AMRO Private Banking.
Underscoring continued investors appetite for Europe and its companies, Lipper data showed US funds putting money into the region’s equities for a 28th week in a row.