By Sruthi Shankar
(Reuters) – European stocks nearly hit record highs on Tuesday amid optimism around several countries easing economic restrictions, falling unemployment rates in the UK and strong business results.
The pan-European STOXX 600 index rose 0.5%, barely trading after its record last week, with cyclical sectors linked to the economy like mining, oil and gas and automakers leading the earnings.
The German DAX hit an all-time high early in the session and the Italian FTSE MIB added 0.9% to the new pre-pandemic levels.
Inflation fears over a rally in commodity prices, unprecedented fiscal and monetary policy support as well as supply chain issues have raised concerns that central banks are pulling back support, causing equity volatility world last week.
âIf we have inflation globally, cyclical stocks normally perform better than growth stocks,â said Christian Stocker, strategist at UniCredit.
“The weight of cyclicals is much higher in Europe and from a relative point of view this is an advantage for European equities.”
British stocks applauded data which showed Britain’s unemployment rate fell more than expected to 4.8% in the first quarter when the country was under a tight lockdown, while hires rose again in April. [.L]
As the earnings season draws to a close, analysts expect STOXX 600 company profits to jump 90.2% in the first quarter and 93.4% in the second, according to Refinitiv IBES data.
The world’s largest hearing aid maker Sonova Holding jumped 7.9% after predicting strong growth this year due to a market recovery and new products.
Cigarette maker Winston Imperial Brands rose 1.3% after reiterating its outlook for the full year.
Telecommunications have been hit, with Vodafone falling 6.7% after the UK mobile operator reported a 1.2% drop in full-year adjusted profits as COVID-19 hit revenues at roaming and handset sales.
French telecoms group Iliad fell 9.6% after announcing it would downgrade a key cash flow target by increasing spending on 5G networks.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur)