Earnings beats from UBS, Peugeot fire up European stocks

FAN Editor
A DAX logo is pictured at the trading floor of the stock exchange in Frankfurt
A DAX logo is pictured at the trading floor of the stock exchange in Frankfurt, Germany December 29, 2017. REUTERS/Ralph Orlowski/File Photo

July 24, 2018

By Helen Reid

LONDON (Reuters) – Strong results from bank UBS, car company PSA and chipmaker AMS propelled European stocks higher on Tuesday, breaking a three-day slide as the earnings season delivered a boost to the market.

Some of this year’s worst-performing sectors – autos and banks – jumped thanks to these solid updates.

The pan-European STOXX 600 <.STOXX> built on early gains to rise 0.8 percent by 0838 GMT, with heavyweight UBS <UBSG.S> the biggest boost, up 3.4 percent after its second-quarter profit topped expectations.

Gains in UBS boosted the banks sector <.SX7P> up 1.3 percent, with Credit Suisse <CSGN.S>, Italy’s Unicredit <CRDI.MI> and Spain’s BBVA <BBVA.MC> climbing 2.5 to 2.9 percent.

PSA Group <PEUP.PA> jumped 10 percent after the Peugeot owner reported strong profits thanks to a turnaround at its newly acquired Opel-Vauxhall division.

The stock hit its highest level since June 2008, a ten-year high, and UBS analysts said the results would likely trigger upgrades to consensus full-year earnings of about 30 percent.

PSA provided a boost to the autos sector <.SXAP> which has been a main victim of U.S. threats of higher tariffs on car imports. The sector index jumped 2 percent, second only to basic materials <.SXPP> which climbed on stronger metals prices.

In an earnings season where investors are focusing on companies’ outlook, guidance from several of them was particularly strong, driving sharp share price gains.

Austrian chipmaker and iPhone supplier AMS <AMS.S> jumped 10 percent after the company said new orders would secure strong growth in the second half, and reported higher than expected second-quarter revenue.

“AMS has helped quell widespread concerns in the market regarding Apple’s ramp of 3D sensing components for its new iPhones in the second half, by providing very strong guidance for Q3 2018,” said Liberum analyst Janardan Menon.

The tech sector <.SX8P> climbed 1.2 percent, with chipmakers STMicro <STM.PA> and BE Semiconductor <BESI.AS> also rising 2.8 to 3 percent.

Stellar results from Google parent Alphabet <GOOGL.O> overnight had boosted Asian tech stocks too, triggering renewed optimism about the sector responsible for the lion’s share of equity market growth in the U.S. and Asia.

Overall second-quarter earnings growth for the STOXX 600 was expected to come in at 8.1 percent year-on-year, stronger than the first quarter.

“Positive European earnings are continuing a theme we have seen with the US over the last few weeks which should help soothe concerns that the divergence between the US and Europe would have translated into even wider discrepancies in EPS growth,” said Edward Park, investment director at Brooks Macdonald.

Top of the STOXX was French prepaid meal voucher and card provider Edenred <EDEN.PA>, touching record highs and up 11.5 percent, after predicting it would beat annual growth goals this year.

Finnish paper maker UPM <UPM.HE> rose 3.1 percent after it forecast significant earnings growth for the second half. Its gains boosted peer Huhtamaki <HUH1V.HE> as well, up 2.6 percent.

In the debit column, shares in electrical components supplier Spectris <SXS.L> fell 6 percent, with analysts disappointed the company provided no further details on cost saving programs.

(Reporting by Helen Reid; editing by Danilo Masoni/Keith Weir)

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