Earnings Optimism Drives European Markets to Record Territory

Bridgette Randall
18 Apr, 2023
Frankfurt

The European markets advanced in cautious trading as investors remained focused on corporate earnings.  

Benchmark indexes opened slightly higher but extended gains and the French index traded at a new record high after China\\\'s economy expanded at a faster pace in the first quarter. 

China\\\'s GDP rose at an annual pace of 4.5% in the first quarter, a rebound from 2.9% in the fourth quarter, the National Bureau of Statistics said Tuesday. 

The stronger-than-expected rebound was in part driven by additional stimulus provided by the Chinese government for infrastructure projects. 

Economists in China were anticipating the GDP to expand at 4.0% and the faster rebound raised hopes that the world\\\'s second largest economy may exceed the 5.0% growth target set by the government in 2023. 

Meanwhile, investors overlooked the weakening of the German investor morale in April and the UK\\\'s annual wage growth was significantly ahead of market expectations.

 

UK Wage Growth Ahead of Expectations

Average weekly earnings from a year ago in three months to February rose 5.9% to £638.0, the Office for National Statistics said Tuesday. 

Regular pay, which excludes bonus, increased 6.6% to £596.0, ahead of expectations of 6.2% set by some economists. 

Regular wages adjusted for inflation fell 3% and excluding bonus declined 2.3%, the largest decline since 2009.  

 

Italy\\\'s Foreign Trade Swung to Surplus

Italy\\\'s foreign trade swung to surplus after exports rose faster than imports, the statistical agency Istat reported Tuesday.

Total exports not adjusted for seasonal factors increased to Є52.44 billion and imports rose to Є50.34 billion, resulting in trade surplus of Є2.2018 billion. 

Italy\\\'s non-seasonally adjusted merchandise trade swung to a surplus of Є2.108 billion from a deficit of Є1.475 billion. Excluding energy, trade surplus rose to Є7.9 billion. 

On a seasonally adjusted basis, trade surplus increased to Є2.9 billion from Є1.99 billion in January after imports declined for the sixth month in a row. 

Non-seasonally adjusted exports increased 10.8% from a year ago in February following 15.5% in the previous month and imports rose at a slower pace of 3.6% from 8.6% in January. 

Import prices in February fell 1.7% from the previous month but rose 1.3% from a year ago. 

For the first quarter ending in March, non-seasonally adjusted trade deficit was Є2.128 billion. 

 

Indexes & Yields 

The DAX index increased 0.5% to 15,863.23, the CAC-40 index added 0.5% to 7,537.29 and the FTSE 100 index advanced 0.2% to 7,537.29. 

The yield on 10-year German Bunds inched higher to 2.46%. French bonds hovered near 2.95%, the UK gilts to 3.71% and Italian bonds to 4.28%.  

The euro edged lower to $1.097, the British pound traded down to $1.241 and the Swiss franc trended lower to 89.66 cents. 

Brent crude was nearly unchanged at $84.76 a barrel and the Dutch TTF natural gas edged up 26 cents to Є41.79 per MWh. 

 

Europe Stock Movers 

easyJet plc increased 0.9% to 515.68 pence after the deep discount airline forecasted full-year profit is likely to exceed market expectations. 

UBS Group AG increased 1.2% to Sfr 18.95 after the Swiss bank said it may use some of the shares held in treasury instead of canceling them for the purchase of Credit Suisse. 

MTU Aero Engines AG increased 1.3% to €240.30 after the maker of military engines reported better-than-expected revenue. 

MTU Aero said first quarter revenue increased to €1.54 billion and adjusted earnings of €212 million. 

The preliminary first quarter results are ahead of the market expectations of 1.4 billion in revenue and 172 million in adjusted earnings. 

Free cash in the quarter was €93 million, lower than market estimate of €97 million.   

The company said it will release the first quarter financial results on April 26. 

LM Ericsson dropped 6.6% to SEK 58.32 despite the Swedish telecom equipment maker reporting better-than-expected core earnings in the first quarter. 

Net sales in the first quarter increased 14% to SEK62.6 billion but net income plunged 46% to SEK 1.6 billion from SEK 2.9 billion and diluted earnings per share declined to SEK0.45 from SEK0.88 a year ago.