European shares take heart from Powell testimony as earnings flow in

MILAN/LONDON (Reuters) – European shares rose on Tuesday in a choppy session, as stocks were buoyed by upbeat comments in Federal Reserve Chairman Jerome Powell’s testimony amid a batch of mixed company updates.

  • FILE PHOTO: The German share price index, DAX board, is seen at the stock exchange in Frankfurt, Germany, March 20, 2018. REUTERS/Staff/Remote
  • Telecoms .SXKP stocks fell the most, down 1.2 percent, weighed down by a 4 percent drop in Telenor (TEL.OL) after the Norwegian telecoms operator posted second-quarter results that lagged forecasts.

    The declines were offset by strength in banks and a rebound in mining stocks.

    The pan-European STOXX 600 index was up 0.2 percent at its close. Earlier losses turned to gains following Powell’s testimony, in which the Fed chairman said that he saw “several years” of strength in the jobs market and low inflation.

    Powell’s testimony sent the dollar higher, putting pressure on the euro, which in turn helped the German exporter-heavy DAX index .GDAXI to outperform. It ended 0.9 percent higher.

    “Currency weaknesses are resulting in outperformance for European indices against their U.S. counterparts,” Joshua Mahony, market analyst at IG, said.

    Eyes were also on the second-quarter earnings season.

    Husqvarna (HUSQb.ST) fell the most on the STOXX, 17.4 percent, after the world’s biggest maker of outdoor power tools posted an unexpected drop in operating profit. Its CEO told Reuters that it expected a negative effect from tariffs in 2018 and a bigger impact in 2019.

    Banks, buoyed in the previous session by better-than-expected earnings from Deutsche Bank (DBKGn.DE), declined. SEB (SEBa.ST) gained 4.3 percent after net interest income at the Swedish bank beat forecasts thanks to strong corporate demand.

    Positive updates also lifted shares in French supermarket retailer Casino (CASP.PA), Norwegian media group Schibsted (SBSTA.OL) and Swedish medical technology group Getinge (GETIb.ST), which rose 3.2 percent, 12.6 percent and 10.5 percent respectively.

    Thyssenkrupp (TKAG.DE) jumped more than 9 percent after Chairman Ulrich Lehner quit, raising hopes of a restructuring at the German conglomerate.

    “A sharply worded resignation announcement from Dr. Lehner makes clear that aggressive restructuring may be in the cards, supporting our 33 euros sum of the parts based price target,” Jefferies analyst Seth Rosenfeld said.

    Elsewhere, dealmaking activity drove share price moves.

    Swedish telecom operator Telia (TELIA.ST) fell more than 4 percent after agreeing to buy TDC’s Norwegian business. Italian TV group Mediaset (MS.MI) added 3.5 percent after it made a joint bid for tower company EI Towers (EIT.MI).

    EI Towers soared 15.1 percent.

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