By Barbara Kollmeyer
European stocks got a boost from earnings news on Wednesday, while Italian assets charged higher after former European Central Bank President Mario Draghi was given a mandate to form a new government.
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP -0.95% rose 0.5% to 408.22, after a near 1.3% gain on Tuesday, which was the best gain since Jan. 6. The German DAX /zigman2/quotes/210597999/delayed DX:DAX -0.92% rose 0.5%, the French CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 -0.80% gained 0.2%, and the FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX -1.66% was flat.
The FTSE MIB Italy index /zigman2/quotes/210598024/delayed IT:I945 -0.87% surged 2.5% and Italian borrowing costs fell sharply, with the yield /zigman2/quotes/211347230/realtime BX:TMBMKIT-10Y +5.27% on the 10-year falling bonds dropped 8 basis points to 0.58%. Draghi met with Italian President Sergio Mattarella early on Wednesday after last-ditch negotiations among political parties collapsed.
The market’s response “suggests they think the government can govern for a while and enact reforms and has, hence, some momentum to it,” said Sébastien Galy, senior macro strategist, at Nordea, in a note to clients. Italy has been the worst-hit European Union nation by the COVID-19 pandemic.
“We expect Draghi to form a new government with broad support (at least initially). Still, a downside tail risk exists if Draghi does not succeed in forming a new government. He is the “lender of last resort” in terms of institutional and political capital and, if he fails, we would expect an increase in sovereign risk,” said a team of economists led by Sven Jari Stehn at Goldman Sachs.
Italian banks were leading the gains, with Intesa Sanpaolo /zigman2/quotes/206161760/delayed IT:ISP -1.95% and UniCredit /zigman2/quotes/200769686/delayed IT:UCG -1.55% up over 4% each.
U.S. stocks were higher, led by technology giant Alphabet /zigman2/quotes/202490156/composite GOOGL -3.08% and e-commerce group Amazon /zigman2/quotes/210331248/composite AMZN -2.23% , whose earnings were somewhat overshadowed by news that Chief Executive Jeff Bezos will step down. He will become executive chairman with the CEO spot taken by Amazon Web Services head Andy Jassy.
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European earnings news boosted shares of several companies, with Novo Nordisk /zigman2/quotes/203484366/composite NVO +1.85% surging 4%, after the Danish pharmaceutical company posted a forecast-beating rise in fourth-quarter net profit.
Shares of Publicis /zigman2/quotes/207669560/delayed FR:PUB -1.42% rose more than 5%, after the advertising giant said 2020 ended with revenue only slightly below the previous year , as its data business Epsilon helped drive U.S. growth. The company was unable to offer guidance, citing continuing uncertainty from the COVID-19 pandemic.
Drug companies were in the spotlight. GlaxoSmithKline /zigman2/quotes/209463850/composite GSK +0.39% /zigman2/quotes/200381158/delayed UK:GSK -0.98% announced a €150 million ($180.7 million) partnership with German pharmaceutical CureVac /zigman2/quotes/219999729/composite CVAC -4.09% to develop new COVID-19 vaccines. CureVac shares rose in U.S. trading but GlaxoSmithKline fell after reporting a profit fall.
And fellow U.K. drug company AstraZeneca /zigman2/quotes/200304487/composite AZN +0.74% /zigman2/quotes/203048482/delayed UK:AZN -0.63% said a study by its partner the University of Oxford shows that a single shot of the COVID-19 vaccine they are developing will offer 76% protection from the disease for up to three months, with a second dose after 12 weeks taking the efficacy up to 82.4%
Vodafone /zigman2/quotes/202862751/composite VOD 0.00% /zigman2/quotes/202484985/delayed UK:VOD -1.76% shares climbed 3.5%, after the telecoms group said it returned to organic service revenue growth in the third quarter of fiscal 2021, and reiterated full-year guidance.
Banco Santander /zigman2/quotes/202859081/composite SAN +0.25% /zigman2/quotes/205677933/delayed ES:SAN -2.21% shares rose 2.5%, after the Spanish bank said it expects higher profitability this year as it met profits guidance for 2020 and posted a key capital ratio above its target range.
Shares of Siemens /zigman2/quotes/205905025/delayed XE:SIE -0.63% rose over 1%, after the German engineering conglomerate reported higher net profit in the first quarter of fiscal 2021, and raised guidance for the year.
Commodity trading and mining group Glencore /zigman2/quotes/201400686/delayed UK:GLEN -3.06% on Wednesday reported that its 2020 coal and copper production was in line with its guidance. Shares fell over 1%.
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