European stocks close higher as earnings take center stage

European stock markets rose for a second straight session on Wednesday, as geopolitical tensions and concerns over a potential U.S.-China trade war continued to fade and focus instead turned to the corporate earnings season.

U.K. stocks outperformed the wider European market after British inflation unexpectedly fell and sent the pound lower.

What are indexes doing?

The Stoxx Europe 600 index
SXXP, +0.29%
gained 0.3% to close at 381.86, adding to a 0.8% rally from Tuesday when the benchmark ended at a seven-week high.

The U.K.s FTSE 100 index
UKX, +1.26%
climbed 1.3% to 7,317.34, rallying after the pound
GBPUSD, -0.6228%
skidded following the disappointing inflation data. Sterling fell to an intraday low of $1.4173 from $1.4290 late Tuesday in New York.

Germanys DAX 30 index
DAX, +0.04%
ended marginally higher at 12,590.83 on Wednesday, while Frances CAC 40 index
PX1, +0.50%
rose 0.5% to 5,380.17.

The euro
EURUSD, +0.0647%
changed hands at $1.2377 compared with $1.2370 on Tuesday.

What is driving the market?

A strong start to the first-quarter earnings season appeared to overshadow concerns about the Syrian conflict and the trade fight between China and the U.S., the worlds two largest economies.

Earnings stateside have so far painted a healthy picture of U.S. corporates, with almost 80% of the S&P 500 companies to have reported so far beating earnings forecasts, according to FactSet. Among Stoxx Europe 600 companies, 70% of companies have surpassed expectations.

U.K. stocks got an extra boost from data showing inflation in Britain fell to 2.5% in March, down from 2.7% in February and below forecasts of a 2.7% reading. The weaker reading is good news for households, but could give Bank of England Gov. Mark Carney a headache ahead of next months policy-setting meeting. The market is pricing in an interest-rate rise, but the fall in inflation could make an increase less of a done deal.

What other data are in focus?

The final reading on eurozone inflation in March came in at 1.3%, down from the flash reading of 1.4%, but up from 1.1% in February. Analysts has expected a 1.4% reading and the disappointment weighed on the euro.

What are strategists saying?

There are still mumblings of trade disputes and the geopolitical risk of escalating tensions in the Middle East certainly cannot be discounted, however, for now there is a sense that markets are moving (albeit with less intent) on fundamentals, said Richard Perry, market analyst at Hantec Markets, in a note.

Earnings season in the U.S. has started well, with Goldman Sachs and Netflix the drivers yesterday supporting Wall Street in its continued recovery, a move that is helping markets in Asia and also the eurozone, he added.

Which stocks are in focus?

Shares of Royal Vopak NV
VPK, +6.85%
climbed 6.9% after the Dutch oil storage company said it has the potential to significantly improve core earnings in 2019.

Mediclinic International PLC
MDC, +9.15%
rallied 9.2% after the health-care company said it expects full-year results marginally ahead of expectations.

Danone SA
BN, +1.54%
added 1.5% after the Evian parent confirmed its 2018 outlook after sales in the first quarter.

Heineken NV
HEIA, -1.47%
dropped 1.5% after the Dutch brewer reported slower-than-expected growth in beer volumes in the first quarter.

Intu Properties PLC
INTU, -4.08%
gave up 4.1%, after Hammerson PLC
HMSO, +4.17%
said its abandoning plans to buy theshopping center owner in the face of a weak U.K. retail market. Intu responded by saying Hammersons reasons for dropping the approach were unsatisfactory. Hammerson shares ended up 4.2%.

CYBG, -4.99%
shares slid 5% after the owner of Clydesdale and Yorkshire Bank said it expects to set aside another 拢350 million ($500.7 million) for legacy claims over missold payment-protection insurance. The increased provisions would bring its capital position below its guidance range.

Related Topics European Markets Europe Investing Stocks European Central Bank

Quote References SXXP +1.09 +0.29% UKX +91.29 +1.26% GBPUSD -0.0089 -0.6228% DAX +5.26 +0.04% PX1 +26.63 +0.50% EURUSD +0.0008 +0.0647% VPK +2.68 +6.85% MDC +57.20 +9.15% BN +1.02 +1.54% HEIA -1.32 -1.47% INTU -8.50 -4.08% HMSO +20.60 +4.17% CYBG -15.20 -4.99% Show all references
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Sara Sjolin is a MarketWatch reporter based in London. Follow her on Twitter @sarasjolin.

Sara Sjolin

Sara Sjolin is a MarketWatch reporter based in London. Follow her on Twitter @sarasjolin.

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