Europe's top stocks edged higher yesterday, helped by strong technology and pharmaceutical shares on investor relief that firms including Roche and GlaxoSmithKline met consensus earnings estimates despite a weak dollar.
As investors absorbed a salvo of results from both sides of the Atlantic many fund managers were relatively upbeat about the earnings season so far and cautiously optimistic about future earnings growth.
"US corporate results have been better than we expected and this helps investors look more kindly upon European earnings reports. The bear market is probably over as people look towards an economic recovery," said Adrian Darley, a senior investment manager in European stocks at Gartmore Investment Management.
"Results from Roche help illustrate the market's mentality. It reported a large drop in earnings year-on-year but this was expected as shown by the recent share price weakness and the group's been upbeat about its outlook, so the shares rose."
By 1117 GMT, the FTSE Eurotop 300 index was up 0.3 per cent at 858 points, while the DJ Euro Stoxx 50 index gained 0.14 per cent to 2,440 points.
Around Europe, Britain's FTSE 100 index was 0.49 per cent higher and Germany's DAX was 0.04 per cent up.
France's CAC 40 was 0.25 per cent stronger and the Swiss SMI was 1.48 per cent firmer boosted by Roche's earnings.
Equities were also helped by a fall in the benchmark ten-year bund yield to 4.049 per cent, off three month highs while US stock futures showed further gains in New York are likely.
Many sell-side strategists believe the outlook for corporate earnings is improving as they predict the longed-for economic recovery will materialise in the second half of the financial year and boost demand for products.
"We expect European equities to rise a further 10 per cent by the year end fuelled by cheap valuations, recovering ROE (return on equity) and better economic growth," said strategists at Morgan Stanley in a note.
Shares in Roche rose five percent in Zurich, making it the leading European blue-chip gainer.
Shares in GlaxoSmithKline jumped 3.8 per cent after Europe's biggest pharmaceutical group reported a better-than-expected nine percent rise in second quarter earnings and raised its guidance for the full year.
"The results look very good. Sales were marginally down on what we were expecting, but they were broadly in line. It looks as though the margin was better than expected, so overall earnings came ahead of certainly our expectations," said Michael King, analyst at WestLB.