Earnings cheer lifts European stocks to new highs

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(Reuters) – European stocks hit record highs on Thursday as strong earnings from commodity majors, Airbus and a clutch of other companies set an upbeat tone, with fading concerns about China’s regulatory moves also helping sentiment.

The pan-European STOXX 600 index rose 0.3% to a fresh all-time high of 463 points in morning trading.

Airbus jumped 3.4%, providing the biggest boost to the index, after the world’s largest planemaker sharply raised its forecasts for full-year deliveries and earnings.

UK-listed Royal Dutch Shell (LON:RDSa) gained 3.5% and France’s TotalEnergies added 2.3% after both companies announced share buybacks as a surge in oil and gas prices boosted their earnings.

Miners, already the best sectoral performers in 2021, rose 1.9% after Anglo American (LON:AAL) boosted its shareholder payout to a record $4.1 billion.

Strong quarterly earnings and optimism around European reopening put the STOXX 600 on course for its sixth straight month of gains despite lingering concerns about inflation and China’s regulatory crackdown.

“Globally diversified stocks have recorded the strongest EPS beats, while consumer stocks with high emerging market exposure have recorded the weakest,” said Milla Savova, investment strategist at BofA said in a note.

Savova, however, noted that mentions of inflation by STOXX 600 companies have risen by more than 400% over the past year, leaving them at an all-time high in absolute terms.

Investors drew comfort that central banks retained their supportive stance. U.S. Federal Reserve Chair Jerome Powell on Wednesday took a dovish turn by saying the U.S. job market still had “some ground to cover” before it was time to start withdrawing economic support.

Finnish telecom equipment maker Nokia (NYSE:NOK) climbed 7.1% after it raised its full-year outlook as it benefits from a sharp turnaround in its business.

Europe’s largest carmaker Volkswagen (DE:VOWG_p) hit a record high earlier as it lifted its profit margin target for the second time in less than three months.

Close to 41% of the STOXX 600 companies have reported so far, and 67% of them have topped analysts’ profit estimates, as per Refinitiv IBES data. Typically, 51% beat earnings forecast.

Overall, profit for STOXX 600 companies are expected to jump 120.8% in the second quarter.

Among decliners, Swiss bank Credit Suisse (SIX:CSGN) dropped 3.9% after reporting a near 80% fall in its second-quarter profit, hit by the fallout from the collapse of Archegos.

Food giant Nestle and brewer Anheuser-Busch InBev fell after their results.

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