By Sara Sjolin, MarketWatch
European stock markets rose for a second straight session on Wednesday, as geopolitical tensions and concerns over a potential U.S.-China trade war continued to fade and focus instead turned to the corporate earnings season.
U.K. stocks outperformed the wider European market after British inflation unexpectedly fell and sent the pound lower.
What are indexes doing?
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP +2.19% gained 0.3% to close at 381.86, adding to a 0.8% rally from Tuesday when the benchmark ended at a seven-week high.
The U.K.’s FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +1.86% climbed 1.3% to 7,317.34, rallying after the pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.9572% skidded following the disappointing inflation data. Sterling fell to an intraday low of $1.4173 from $1.4290 late Tuesday in New York.
Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX +3.13% ended marginally higher at 12,590.83 on Wednesday, while France’s CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 +2.38% rose 0.5% to 5,380.17.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.3181% changed hands at $1.2377 compared with $1.2370 on Tuesday.
What is driving the market?
A strong start to the first-quarter earnings season appeared to overshadow concerns about the Syrian conflict and the trade fight between China and the U.S., the world’s two largest economies.
Earnings stateside have so far painted a healthy picture of U.S. corporates, with almost 80% of the S&P 500 companies to have reported so far beating earnings forecasts, according to FactSet. Among Stoxx Europe 600 companies, 70% of companies have surpassed expectations.
U.K. stocks got an extra boost from data showing inflation in Britain fell to 2.5% in March, down from 2.7% in February and below forecasts of a 2.7% reading. The weaker reading is good news for households, but could give Bank of England Gov. Mark Carney a headache ahead of next month’s policy-setting meeting. The market is pricing in an interest-rate rise, but the fall in inflation could make an increase less of a done deal.
What other data are in focus?
The final reading on eurozone inflation in March came in at 1.3%, down from the flash reading of 1.4%, but up from 1.1% in February. Analysts has expected a 1.4% reading and the disappointment weighed on the euro.
What are strategists saying?
“There are still mumblings of trade disputes and the geopolitical risk of escalating tensions in the Middle East certainly cannot be discounted, however, for now there is a sense that markets are moving (albeit with less intent) on fundamentals,” said Richard Perry, market analyst at Hantec Markets, in a note.
“Earnings season in the U.S. has started well, with Goldman Sachs and Netflix the drivers yesterday supporting Wall Street in its continued recovery, a move that is helping markets in Asia and also the eurozone,” he added.
Which stocks are in focus?
Shares of Royal Vopak NV /zigman2/quotes/205771293/delayed NL:VPK +0.31% climbed 6.9% after the Dutch oil storage company said it has the potential to “significantly improve” core earnings in 2019.
Mediclinic International PLC /zigman2/quotes/201361237/delayed UK:MDC +1.73% rallied 9.2% after the health-care company said it expects full-year results marginally ahead of expectations.
Heineken NV /zigman2/quotes/205347870/delayed NL:HEIA +3.27% dropped 1.5% after the Dutch brewer reported slower-than-expected growth in beer volumes in the first quarter.
Intu Properties PLC gave up 4.1%, after Hammerson PLC /zigman2/quotes/206876822/delayed UK:HMSO +6.26% said it’s abandoning plans to buy the shopping center owner in the face of a weak U.K. retail market. Intu responded by saying Hammerson’s reasons for dropping the approach were “unsatisfactory.” Hammerson shares ended up 4.2%.
CYBG PLC shares slid 5% after the owner of Clydesdale and Yorkshire Bank said it expects to set aside another £350 million ($500.7 million) for legacy claims over missold payment-protection insurance. The increased provisions would bring its capital position below its guidance range.