European stocks finished with gains Wednesday, as falls in the euro and the pound helped exporters and offset disappointing financial updates from companies such as Zalando.
Indexes across Europe in part keyed off a surge of more than 100 points for the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.96% , which was positioned to close above 23,000 for the first time.
“Stateside sentiment remains bullish thanks to more Wall St. record highs and earnings beating expectations. A strong USD, and the prospect of ECB QE lasting longer, has pushed the EUR lower to the glee of German exporters,” said Mike van Dulken, Accendo Markets’ head of research, in a note.
Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX +0.24% picked up 0.4% to end at 13,043.03, a new all-time closing high above the prior record set Monday. In London, the FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.35% rose 0.4% to finish at 7,542.87, not far from its record close achieved last week.
The exporter-heavy German and U.K. indexes logged gains as the both the euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.1058% and the pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.1029% lost ground during the session against the U.S. dollar. Pullbacks in those currencies can help lift shares of exporters, as those companies make most of their earnings overseas.
Among big exporters, shares of educational materials publisher Pearson PLC /zigman2/quotes/204954587/delayed UK:PSON +4.36% popped up 3% and German auto makers Volkswagen AG /zigman2/quotes/204309985/delayed DE:VOW3 +1.37% and BMW /zigman2/quotes/209548467/delayed DE:BMW -1.29% rose 1.1% and 0.9%, respectively.
The pound traded below $1.32, while the euro bought less than $1.18.
France’s CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 +0.55% was up 0.4% to finish at 5,383.81.
ECB reprieve: Germany’s constitutional court threw out a cease-and-desist request that could have halted the European Central Bank’s giant bond-buying program, offering some comfort to the bank’s policy makers as they prepare to extend the purchases to 2018.
The yield on the 10-year German bund /zigman2/quotes/211347112/realtime BX:TMBMKDE-10Y +44.64% came off session lows and was up 2 basis points at 0.378%, according to Tradeweb.
Value investing: Overall, European equities’ valuations are “very attractive relative to the U.S.,” said Luiz Sauerbronn, director of the investments group at Brandes Investment Partners, in an interview with MarketWatch this week.
“In Europe, corporate profitability is not quite as strong, it’s starting to recover now ... so we see potential for continued improvement and the multiples that you pay for those profits are much lower,” said Sauerbronn, whose shop focuses on global value investing.
“Having said that, performance [in European stocks] this year has been strong—remember, we want to buy low and sell high—so compared to the beginning of the year, things are not quite as compelling, but on a relative basis, Europe is an interesting place.”
The DAX has been among big index gainers this year, charging up nearly 14%, while the FTSE 100 has picked up a more modest 5.6%.
The European oil and gas sector and U.K. and French grocers offer “quite compelling” opportunities, said Sauerbronn, who added that his company is staying away from German industrial shares.
“There are some German auto [makers] that are very good companies, but they generate a disproportionate percentage of their profits from China,” he said. “This is cyclical industry and China is running on all cylinders, but there are lots of concerns there, especially leverage that’s growing quite a bit. We are concerned that the profits the companies are generating are not on a sustainable level.”
Stock movers: Zalando SE shares /zigman2/quotes/209028521/delayed DE:ZAL +3.46% slid 3.8%. The German online fashion retailer said it may post a third-quarter pretax loss as it continues to invest in technology and infrastructure.
Akzo Nobel NV shares /zigman2/quotes/209835399/delayed NL:AKZA +0.93% dropped 1.8%. The paint and specialty chemicals company posted a 13% drop in third-quarter earnings, citing industry headwinds and unfavorable foreign-exchange conditions.
Reckitt Benckiser Group PLC shed 2.5%. The consumer products company behind brands such as Airwick and Scholl said it would split its operations into two divisions—consumer health and hygiene—after a string of disappointing earnings and a sales slowdown.
Shares of ASML Holding NV /zigman2/quotes/206208657/delayed NL:ASML -2.37% closed down 2.3%, giving up gains that came after the Dutch semiconductor maker said third-quarter profit rose 35% on the back of strong sales.
Off the Stoxx 600, FlyBe Group PLC dropped 20% after the airline said higher-than-expected maintenance costs will put pressure on profit.
Economic data: U.K. workers’ inflation-adjusted wages fell for the sixth consecutive month in August, dropping 0.4% even as the U.K. unemployment rate remained at 4.3%, the lowest in more than 40 years.