By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — European stock markets posted their longest winning streak of the year on Thursday, after U.K. economic-growth data beat expectations, showing the nation didn’t slip into a triple-dip recession.
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP +0.04% rose 0.8% to close at 296.88, extending gains into a fifth straight session.
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Shares of British American Tobacco PLC /zigman2/quotes/209116881/delayed UK:BATS -0.77% /zigman2/quotes/210207837/composite BTI -0.86% added 1.2%, after the firm said first-quarter revenue went up 5% at constant exchange rates. Additionally, the board said it’s confident of another year of earnings growth in line with long-term strategic goals.
Shares of Kazakhmys PLC /zigman2/quotes/208098927/delayed UK:KAZ +0.25% jumped 4.3%. The miner said it’s on track to meet its full-year copper output target.
Shares of Banco Santander SA /zigman2/quotes/205677933/delayed ES:SAN +1.36% /zigman2/quotes/202859081/composite SAN -0.68% dropped 2.4%, after the bank said first-quarter net profit dropped 26%, hit by tough economic conditions in key markets, especially Spain and the U.K.
European stocks erased losses in midmorning action after data from the U.K. Office for National Statistics showed the economy expanded by 0.3% in the first quarter, exceeding expectations of 0.1% growth. A negative reading would have pushed the U.K. economy into a recession for the third time in five years. The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.1722% rallied after the news, rising to $1.5441 from trading around $1.53 ahead of the data and up from $1.5265 in late North America trade on Wednesday.
Rate cut speculation
Other recent data from the euro zone weren’t as upbeat, however, stoking speculation of a 25-basis-point rate cut at the European Central Bank’s policy meeting next week. On Wednesday, data showed business confidence slipped in Germany in April, following downbeat purchasing managers’ indexes the prior day.
“Many economists are pointing out that a short period of bad data may just encourage policy officials to maintain or even enhance current stimulus measures,” said Shavaz Dhalla, financial trader at Spreadex, in a note.
“However, investors need to remain on guard to such an argument, as accepting poor data because it can lead to more stimulus measures does not solve the problem in the long term,” he said.
Guy Foster, head of portfolio strategy at Brewin Dolphin, said a rate cut next week looks “baked in”, but markets will, more importantly, be monitoring what the ECB can do beyond that.
“They’ll be looking at how they can boost lending to small and midsize companies. They are trying to identify what features they can borrow from the Bank of England’s Funding for Lending Scheme,” he said.
He said the euro zone could benefit from a potential shift in Germany’s perception of easing measures, with general elections in September approaching amid signals Europe’s growth woes are spreading to the region’s powerhouse.
“There has been big resistance to unconventional monetary policy and Germany broadly objects to everything. But when you’re months from an election and you need to provide stimulus to boost the economy, you will see a more pragmatic approach to monetary policy,” he said. “We expect to see a softer stance on austerity.” U.S. stocks traded higher on Wall Street, after better-than-expected data on weekly jobless claims.
Among country-specific indexes, the U.K.’s FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX -0.44% closed 0.2% higher at 6,442.59.
Shares of Unilever PLC /zigman2/quotes/205449809/delayed UK:ULVR +0.48% /zigman2/quotes/204685760/composite UL +5.46% slid 3%, after the consumer-goods firm reported first-quarter sales growth below expectations, as slowing North America growth and a weak start to ice cream purchases in Europe added pressure.
AstraZeneca PLC /zigman2/quotes/203048482/delayed UK:AZN -0.58% /zigman2/quotes/200304487/composite AZN -1.81% lost 1.9%, after the drug maker reported a 36% drop in first-quarter pretax profit, falling short of analysts’ expectations.
Shares of Vodafone Group PLC /zigman2/quotes/202484985/delayed UK:VOD -0.33% /zigman2/quotes/202862751/composite VOD -0.59% added 1.7%, after a media report said Verizon Communications Inc. /zigman2/quotes/204980236/composite VZ -0.38% plans to bid for joint venture Verizon Wireless. Verizon declined to comment on the report.
Shares of Munich Reinsurance Company /zigman2/quotes/205537285/delayed DE:MUV2 -0.76% added 1.7% in Frankfurt, after the firm said it expected first-quarter after-tax profit close to 1 billion euros ($1.3 billion).
Outside the major indexes, shares of Royal KPN NV /zigman2/quotes/200683801/delayed NL:KPN +0.28% slumped 6.8%. The Dutch telecom firm said its planned €3 billion rights issue will be two new shares for each existing share.
Logitech International SA /zigman2/quotes/204771595/delayed CH:LOGN +0.33% sank 7.4%, after the computer-accessory maker reported a $36 million loss for the fourth quarter, below expectations of a $4.1 million profit.