European Stocks Post Weekly Gain on French Election, Earnings

UBS’s Smiles on Market Impact From Geopolitics, ECB

European stocks posted their biggest weekly gain since December, fueled by the first round win of a pro-euro candidate in the French election and a raft of stronger corporate earnings.

The Stoxx Europe 600 Index slipped 0.2 percent on Friday, reducing the five-day gain to 2.4 percent, after euro-area consumer prices rose slightly more than expected, failing to stir markets after European Central Bank President Mario Draghi said inflation was still too weak to rein in stimulus. Stocks rallied the most since June on Monday after a political centrist won the first round of French presidential election. Robust corporate earnings from companies including Credit Suisse Group AG and Volvo AB also bolstered markets.

European markets are closed Monday for the Labor Day holiday.

  • With about one-third of companies having reported earnings so far this season among Stoxx 600 Index members, earnings per share has jumped an annual 24 percent, on track to be the biggest increase since the third quarter of 2010. That’s according to data from JPMorgan strategists Emmanuel Cau and Mislav Matejka.
  • Draghi on Thursday showed growing enthusiasm about the state of the euro-region economy, while cautioning that inflationary pressures remain too weak to contemplate paring back monetary stimulus.
  • Euro-area consumer prices rose an annual 1.9 percent in April, exceeding the estimate from economists for 1.8 percent.
  • Investors poured $2.4 billion into European equity funds in the week through April 26, the most since December 2015, according to a Bank of America Merrill Lynch note citing EPFR Global data.
  • There’s a significant opportunity the region’s equities, as the French election is likely to drive a lower risk premium and support “risk on” trade across the region, Citigroup’s equity strategists including Jonathan Stubbs wrote in note.
  • Among the most active shares, Barclays Plc dropped 5.2 percent, the most since June, after trading revenue declined surprisingly in the first quarter.
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