European equities edge up on higher earnings; growth fears persist

The DAX chart of the German stock price index is pictured on the stock exchange in Frankfurt, Germany, August 3, 2022. REUTERS/Staff

Aug 4 (Reuters) – European stocks posted gains on Thursday as some strong quarterly results provided support, while Britain’s FTSE 100 underperformed its peers after Britain’s central bank raised interest rates to highest since 1995.

The pan-European STOXX 600 index (.STOXX), earlier up 0.3% and hitting near two-month highs, gained 0.2% at the close, with the FTSE 100 (.FTSE ) of the UK flat.

The Bank of England raised interest rates by 50 basis points, the most in 27 years, to 1.75% despite warning that a long recession is on the way, as it rushed to quell the surge in inflation. Read more

The European Central Bank raised rates by 50 basis points last month and provided guidance for further hikes to come.

“As the (eurozone) economy underperforms and interest rates rise, we expect European equity prices to fall over the remainder of the year,” economists said. Capital Economics in a note.

“While a recession is likely, we still believe the ECB will hike rates quite aggressively over the next few quarters, driving bond yields higher. And given the significant hurdles for the Bank to use its hedging instrument transmission (TPI), the gaps will widen.”

The ECB’s TPI is a bond buying program aimed at helping the most indebted countries and preventing financial fragmentation.

Europe’s benchmark is down 10% this year on growing concerns about the outlook for equities due to a potential disruption in Russian gas supplies, aggressive monetary tightening cycles, heavy pressures on prices and fears of recession.

Eurozone consumers are bracing for a shrinking economy and high inflation that will continue to eat away at their incomes next year, according to an ECB survey. Read more

Among the stocks, Credit Suisse Group AG (CSGN.S) plans to cut thousands of jobs worldwide, a news outlet said, citing people familiar with the matter. Swiss bank shares rose 1.7% read more

Credit Agricole (CAGR.PA) rose 4.7% as it joined French lenders BNP Paribas (BNPP.PA) and Societe Generale (SOGN.PA) in reporting better-than-expected quarterly profit amid record activity in its investment banking division. Read more

Lufthansa (LHAG.DE) rose 6.4% as it said it expects demand for short-haul flights in Europe to drive growth for its passenger airlines this year, anticipating a return to profit. operation of the group for the whole year. Read more

Glencore (GLEN.L) reaped a multi-billion dollar windfall as the company’s embrace of thermal coal mining generated record profits for the mining and commodities trading group. The shares rose 3.1%.

Reporting by Bansari Mayur Kamdar and Anisha Sircar in Bengaluru; Editing by Shounak Dasgupta and Mike Harrison

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