By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — European stock markets rose for a second day on Tuesday, boosted by upbeat earnings from U.S. bellwether Alcoa Inc. and data showing a slowdown in Chinese inflation.
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP +0.05% picked up 0.2% to close at 288.07, after swinging between small gains and losses for most of the day.
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The index has risen 3% so far this year, although financial turmoil in Cyprus, worries over Portugal’s bailout program and weak U.S. data have shaved points off the index in recent weeks. Earlier in the year, European stock markets rallied on massive easing from central banks and hopes of an economic recovery.
“We have been seeing a bit of a nervous market over the past few weeks, with Cyprus and Portugal adding to volatility,” said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.
“But I think now there’s a little bit of hope after the Alcoa earnings that we will have a decent earnings season. If you look at the fourth quarter last year you had fairly decent earnings — not fantastic but OK — and horrible data at the same time. Economic conditions are better now and I think we will see top-line growth, which could filter through to the bottom line,” he added.
Mining firms posted some of the biggest gains in the pan-European index on Tuesday, as lower inflation data from China fueled expectations that the country will continue its monetary stimulus to support growth. Consumer prices rose a less-than-expected 2.1% in March, markedly lower than the 3.2% inflation rate printed in February.
Asia stocks closed mostly higher.
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“The inflation data were good news. China is of course worried about high inflation and housing bubbles, and this gives the government more room to stimulate the economy,” Gijsels said.
Shares of Eurasian Natural Resources Corp. jumped 5.1% in London and Kazakhmys PLC /zigman2/quotes/208098927/delayed UK:KAZ +1.62% gained 5.6%. Heavyweight Rio Tinto PLC /zigman2/quotes/208934945/delayed UK:RIO +1.86% /zigman2/quotes/202627887/composite RIO -0.19% /zigman2/quotes/200083756/delayed AU:RIO +1.27% closed 4.8% higher. Mining firms tend to rise on expectations of boosted growth in China, as the country is a major user of natural resources. Metals prices were higher across the board.
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Investors also looked to the U.S., where Alcoa, the world’s largest aluminum producer, /zigman2/quotes/200686102/composite AA -3.24% late Monday reported first-quarter earnings ahead of expectations with profit rising 59%, but revenue that missed. The company is considered a gauge of global demand and the unofficial kickoff for the earnings season. Alcoa shares were off 0.6%.
“A little more concerning, however, is the fact that over 100 companies on the S&P 500 have provided negative earnings guidance for Q1 so far, compared to 23 positive pre-announcements,” Jim Reid, strategist at Deutsche Bank, said in a note.
“A glass-half-full view of this may say that it has reduced the chance of negative surprises during the earnings season itself, but for firms with global exposure, we also start to wonder how the continued weakness in Europe and the U.S.-dollar strength is going to impact on their final numbers. It will be an interesting few weeks,” he added.
U.S. stocks were slightly higher on Wall Street.
Back in Europe, banks were among notable gainers. Shares of Deutsche Bank AG /zigman2/quotes/205584254/delayed DE:DBK -0.95% /zigman2/quotes/203042512/composite DB -0.54% added 3.1% in Frankfurt, Crédit Agricole SA /zigman2/quotes/209264506/delayed FR:ACA -1.91% gained 1.7% in Paris and Barclays PLC /zigman2/quotes/208409333/delayed UK:BARC -2.10% /zigman2/quotes/206581728/composite BCS -1.89% rose 3.2% in London.
France’s CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 -0.14% closed 0.1% higher 3,670.72.
Shares of European Aeronautic Defence & Space Co. EADS NV gave up 2.9%, after media group Lagardère SCA /zigman2/quotes/206737784/delayed FR:MMB -7.71% said it sold its entire 7.4% stake in the French defense firm for 2.28 billion euros ($2.96 billion). Lagardère dropped 2.6%.
Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX +0.32% shed 0.3% to 7,637.51. The Federal Statistical Office said exports decreased 1.5% in February month-on-month, while imports slid 3.8%, highlighting worries that both domestic and foreign demand are declining. Also see Jack Lew to Germany: Start spending, already
Car makers, which are some of the country’s biggest exporters, dropped across the board. Shares of Volkswagen AG /zigman2/quotes/204309985/delayed DE:VOW3 -1.83% lost 2.6%, BMW AG /zigman2/quotes/209548467/delayed DE:BMW -0.29% fell 0.6% and Daimler AG /zigman2/quotes/205332368/delayed DE:DAI -0.31% gave up 0.5%.
Also on the decline, shares of Randstad Holding NV /zigman2/quotes/202421454/delayed NL:RAND -1.98% lost 2.4% and Adecco SA /zigman2/quotes/201694772/delayed CH:ADEN -4.90% slipped 1.8%, after Credit Suisse cut the two staffing firms to underperform and neutral respectively, citing challenging economic conditions in the U.S. and Europe.