By Carla Mozee and Victor Reklaitis, MarketWatch
Disappointing financial updates hit Zalando's stock, others
European stocks finished with gains Wednesday, as falls in the
euro and the pound helped exporters and offset disappointing
financial updates from companies such as Zalando.
Where indexes are trading: The Stoxx Europe 600 index posted a
0.3% rise to end at 391.56. On Tuesday, the pan-European benchmark
fell 0.3%
(http://www.marketwatch.com/story/european-stocks-slip-as-auto-shares-fall-credit-suisse-climbs-2017-10-17).
Indexes across Europe in part keyed off a surge of more than 100
points for the Dow Jones Industrial Average , which was positioned
to close above 23,000 for the first time.
"Stateside sentiment remains bullish thanks to more Wall St.
record highs and earnings beating expectations. A strong USD, and
the prospect of ECB QE lasting longer, has pushed the EUR lower to
the glee of German exporters," said Mike van Dulken, Accendo
Markets' head of research, in a note.
Germany's DAX 30 index picked up 0.4% to end at 13,043.03, a new
all-time closing high above the prior record set Monday. In London,
the FTSE 100 rose 0.4% to finish at 7,542.87, not far from its
record close achieved last week.
The exporter-heavy German and U.K. indexes logged gains as the
both the euro and the pound lost ground during the session against
the U.S. dollar. Pullbacks in those currencies can help lift shares
of exporters, as those companies make most of their earnings
overseas.
Among big exporters, shares of educational materials publisher
Pearson PLC (PSON.LN) popped up 3% and German auto makers
Volkswagen AG (VOW.XE) and BMW (BMW.XE) rose 1.1% and 0.9%,
respectively.
The pound traded below $1.32, while the euro bought less than
$1.18.
France's CAC 40 index was up 0.4% to finish at 5,383.81.
ECB reprieve: Germany's constitutional court threw out a
cease-and-desist request that could have halted the European
Central Bank's giant bond-buying program, offering some comfort to
the bank's policy makers as they prepare to extend the purchases to
2018.
The yield on the 10-year German bund came off session lows and
was up 2 basis points at 0.378%, according to Tradeweb.
Value investing: Overall, European equities' valuations are
"very attractive relative to the U.S.," said Luiz Sauerbronn,
director of the investments group at Brandes Investment Partners,
in an interview with MarketWatch this week.
"In Europe, corporate profitability is not quite as strong, it's
starting to recover now ... so we see potential for continued
improvement and the multiples that you pay for those profits are
much lower," said Sauerbronn, whose shop focuses on global value
investing.
"Having said that, performance [in European stocks] this year
has been strong--remember, we want to buy low and sell high--so
compared to the beginning of the year, things are not quite as
compelling, but on a relative basis, Europe is an interesting
place."
The DAX has been among big index gainers this year, charging up
nearly 14%, while the FTSE 100 has picked up a more modest
5.6%.
The European oil and gas sector and U.K. and French grocers
offer "quite compelling" opportunities, said Sauerbronn, who added
that his company is staying away from German industrial shares.
"There are some German auto [makers] that are very good
companies, but they generate a disproportionate percentage of their
profits from China," he said. "This is cyclical industry and China
is running on all cylinders, but there are lots of concerns there,
especially leverage that's growing quite a bit. We are concerned
that the profits the companies are generating are not on a
sustainable level."
Stock movers: Zalando SE shares (ZAL.XE) slid 3.8%. The German
online fashion retailer said it may post a third-quarter pretax
loss
(http://www.marketwatch.com/story/zalando-warns-on-loss-amid-investments-2017-10-18)
as it continues to invest in technology and infrastructure.
Akzo Nobel NV shares (AKZOY) dropped 1.8%. The paint and
specialty chemicals company posted a 13% drop in third-quarter
earnings
(http://www.marketwatch.com/story/akzo-nobel-earnings-fall-13-on-headwinds-fx-hit-2017-10-18),
citing industry headwinds and unfavorable foreign-exchange
conditions.
Reckitt Benckiser Group PLC (RB.LN) shed 2.5%. The consumer
products company behind brands such as Airwick and Scholl said it
would split its operations into two divisions
(http://www.marketwatch.com/story/reckitt-benckiser-to-overhaul-units-as-sales-slow-2017-10-18)--consumer
health and hygiene--after a string of disappointing earnings and a
sales slowdown.
Shares of ASML Holding NV (ASML.AE) closed down 2.3%, giving up
gains that came after the Dutch semiconductor maker said
third-quarter profit rose 35% on the back of strong sales
(http://www.marketwatch.com/story/asml-profit-up-35-on-strong-sales-2017-10-18).
Off the Stoxx 600, FlyBe Group PLC (FLYB.LN) dropped 20% after
the airline said higher-than-expected maintenance costs will put
pressure on profit.
Economic data: U.K. workers' inflation-adjusted wages fell for
the sixth consecutive month
(http://www.marketwatch.com/story/uk-real-wages-fall-for-6th-month-in-a-row-2017-10-18)
in August, dropping 0.4% even as the U.K. unemployment rate
remained at 4.3%, the lowest in more than 40 years.
(END) Dow Jones Newswires
October 18, 2017 12:14 ET (16:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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