- Disappointing global data seen persuading Fed to hold fire
- Unilever rises, Burberry tumbles after posting results
European stocks snapped a three-day losing streak amid some better-than-expected earnings reports and investor speculation that poor economic data from around the world will persuade the Federal Reserve to put off raising rates for longer.
The Stoxx Europe 600 Index rose 1.5 percent to 360.99 at the close of trading. Shares slid yesterday after disappointing Chinese inflation data. Concern over the strength of the world’s second-biggest economy, uncertainty over Fed policy and the scandal at Volkswagen AG helped drag the Stoxx 600 down 13 percent from its April high, prompting at least two thirds of equity strategists tracked by Bloomberg to cut their estimates for where the gauge will end this year to 395 from 422 in July.
“What bad news there is I think people are getting more confident that it can be dealt with by leaving policy looser for longer,” said Ben Kumar, who helps oversee about $14 billion as an investment manager at Seven Investment Management in London. “There are some decent earnings reports coming through; there are some bad ones too, but that’s OK.”
Disappointing U.S. retail sales data yesterday, combined with a better-than-forecast weekly jobless report today, offered further evidence of the economy’s patchy recovery. Investors now don’t see better-than-even odds of interest rates increasing until March next year. The chance of liftoff this month has fallen to 6 percent.
“The bad news is that the US economy seems to be having a bit of a wobble, the good news is that it means the Fed was right not to raise rates in September,” said Kumar. “People are giving a bit of credibility back to Janet Yellen, that means people are a little bit more languid about the rate rise speculation.”
Investors are also looking to company earnings for indications of the strength of the euro-area economy. Unilever added 3.6 percent after the maker of Magnum ice cream posted better-than-estimated third-quarter sales growth. ProSiebenSat.1 Media SE gained 3.3 percent after raising its 2018 revenue and earnings outlook because of faster growth in all its businesses. Man Group Plc climbed 5.2 percent after the world’s largest publicly traded hedge fund firm reported net inflows of $1.4 billion for the third quarter, reversing two straight quarters of outflows.
Burberry Group Plc tumbled 8.3 percent, the most in three years, after the luxury-goods maker posted first-half revenue that trailed analysts’ estimates as sales declined in Asia. Sulzer AG slipped 1.7 percent after the Swiss maker of pumps said it is budgeting for a drop in earnings of as much as 15 percent this year because of a slowdown in China and the oil-and-gas market.
Volkswagen retreated 3.6 percent after the German government forced the carmaker to recall about 2.4 million diesel cars in its home market after rejecting its proposal for voluntary repairs. TeliaSonera AB dropped 3 percent after Muddy Waters LLC published a report questioning the extent of the Swedish phone carrier’s transparency regarding legal issues in its Eurasian business.