By Carla Mozee, MarketWatch
Metro shares punished after profit warning
European stocks finished at their highest in more than 10 weeks
Monday, with a turnaround in the market aided by gains for
financial stocks as bond yields rose, moves that came ahead of this
week's European Central Bank meeting.
How markets moved
The Stoxx Europe 600 index closed up 0.4% to 383.18, the best
close since Feb. 2, according to FactSet data. Telecom, oil and gas
and financial stocks led sector gainers, while utility, consumer
goods and basic materials shares fell. The index on Friday ended
fractionally lower
(http://www.marketwatch.com/story/european-stocks-fall-from-7-week-high-as-consumer-goods-shares-struggle-2018-04-20),
but ended last week up by 0.7%, a fourth consecutive weekly
advance.
In Frankfurt, the DAX 30 index ended up by 0.3% at 12,572.39,
and in Paris, the CAC 40 index picked up 0.5% to finish at
5,438.75.
Spain's IBEX 35 tacked on 0.4% to 9,922.00, and the U.K.'s FTSE
100 index closed up 0.4% to 7,398.87.
The euro bought $1.2220, down from $1.2289 late Thursday in New York.
The yield on Germany's 10-year bund rose 4 basis points to
0.63%, according to Tradeweb data.
What drove the market
European stocks swung higher during the session, with shares of
bank and insurance companies bolstered by higher interest rates in
the form of gains for eurozone bond yields. Those yields moved up
as the U.S. 10-year Treasury yield edged toward the 3% level. The
Stoxx Europe 600 Insurance Index climbed 1% and the Stoxx Europe
600 Banks Index bulked up by 0.7%.
"The recent rally in metal prices, and oil prices hitting fresh
four-year highs have stoked fears that inflation in the U.S. will
pick up sharply, raising interest rate-hike expectations," said
Fiona Cincotta, senior market analyst at City Index, in a note.
Investors continued to sort through corporate earnings reports,
and did so Monday as preliminary manufacturing and services PMI
reports from the eurozone, Germany and France largely beat
expectations. But IHS Markit did say that the eurozone economy
remains in a "lower gear" as business-activity expansion has marked
signs of weaker demand growth and supply constraints.
The PMI data arrived after European Central Bank President Mario
Draghi reportedly said on Friday that the region's growth cycle may
have peaked.
Investors will watch what Draghi and the ECB will say about
continuing the bank's quantitative easing measures when they
release the next policy decision on Thursday.
Read:Signs of higher inflation are popping up everywhere
(http://www.marketwatch.com/story/its-not-just-oil-signs-of-higher-inflation-popping-up-everywhere-2018-04-19)
Also check out:Expect a careful, dovish Mario Draghi at next
week's ECB meeting
(http://www.marketwatch.com/story/expect-a-careful-dovish-mario-draghi-at-next-weeks-ecb-meeting-says-hsbc-2018-04-18)
What strategists are saying
"With the language having changed at the latest meeting, the
[ECB] is likely to stay on hold this Thursday. We expect a dovish
tone, but not too dovish," said Daniele Antonucci, an economist at
Morgan Stanley, in a note. "The Governing Council is likely to say
that the growth momentum is somewhat slower, but we doubt that
it'll be very concerned about this,given that it's likely to see it
in the context of a still robust pace of expansion. We think that
the next shift in communication, on when and how QE will end, is
likely to come at the June meeting."
What data were in focus?
IHS Markit said it's flash April reading for eurozone services
activity was at 55.0, above a FactSet estimate of 54.8. The flash
manufacturing PMI of 56.0 met expectations.
Stocks in focus
UBS (UBS) fell 2.5%, but pared larger losses, even as the Swiss
bank's first-quarter earnings net profit rose 19%, supported by the
performance of its wealth-management unit
(http://www.marketwatch.com/story/ubs-profit-lifted-by-wealth-management-gains-2018-04-23).
Rortork PLC (ROR.LN) jumped 10.9% as the maker of industrial
flow-control equipment posted a 10% rise in first-quarter revenue
and said it expects full-year revenue to increase on year
(http://www.marketwatch.com/story/rotork-revenue-climbs-10-sees-further-growth-2018-04-23)
despite a 5% currency headwind.
Metro AG (B4B.XE) tumbled 9.3% in the wake of the German
retailer's 2018 profit warning issued Friday, citing
underperformance in its Russian business. HSBC cut its rating on
Metro to reduce from buy, and Commerzbank cut its rating to hold
from buy.
"Two consecutive communication mishaps in less than one year
after the demerger have left investors puzzled and confidence may
have evaporated," said Commerzbank analyst Juergen Elfers in a
research note.
Royal Philips NV shares (PHG) rose 5.5% as the Dutch technology
company backed its target
(http://www.marketwatch.com/story/philips-income-falls-on-restructuring-2018-04-23)
for the 2017-2020 years of 4%-6% comparable sales growth and an
average annual 100 basis points improvement in adjusted Ebita
margin.
(END) Dow Jones Newswires
April 23, 2018 13:11 ET (17:11 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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