European Stocks Post Best Week Since January on Strong Earnings

(Bloomberg) -- European stocks posted the best weekly performance since January after investors responded positively to an earnings deluge and as key US inflation data met estimates.

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The Stoxx 600 Index extended gains on Friday to close the week 1.7% higher. The Federal Reserve’s preferred core inflation gauge matched expectations, sparing traders the shock of another hot reading on price pressures. Almost all industry groups were in the green.

The UK’s FTSE 100 also recorded a stellar week, the best since September 2023.

Construction and materials led gains after Cie de Saint-Gobain beat earnings expectations. Miners rose after copper hit $10,000 a ton for the first time in two years and as Anglo American rallied on the news that activist hedge fund Elliott Investment Management has built a stake in the miner.

Separately, UK cybersecurity company Darktrace Plc agreed to sell itself to Thoma Bravo for an equity value of about $5.32 billion.

“The bidding bonanza for UK-listed firms goes on, and this is acting as a constant reminder to global investors that, even with the FTSE 100 at a record high, UK stocks look cheap compared to their US cousins,” said Chris Beauchamp, chief market analyst at online trading platform IG. “At this point it almost seems like every major stock in the UK is up for grabs, so traders can hardly be blamed for piling in.”

Meanwhile, CVC Capital Partners Plc soared 17% as the private equity firm made its debut in Amsterdam. Tech stocks got a boost after US megacaps Microsoft Corp. and Google owner Alphabet Inc. trounced Wall Street estimates. Chemical stocks were laggards after disappointing results from IMCD NV.

Investors have responded mostly positively to the deluge of earnings this week. Still, this year’s rally has slowed in April as investors worried about geopolitical risks and higher-for-longer interest rates.

“In general, the European earnings season is shaping up very well so far,” said Joachim Klement, strategist at Liberum. He noted particularly strong results in the financial and basic materials sectors. “A positive earnings season would underpin our view that equities are going to re-accelerate and rally for the rest of the year on the back of an improving economy in Europe and rate cuts” by the European Central Bank and the Bank of England, he said.

Among other individual stocks, Airbus SE dropped after first-quarter results that were significantly below estimates. Natwest Group Plc gained after beating estimates as lending and deposits increased amid signs of improving customer confidence. Amundi SA rallied after the asset manager posted inflows that surpassed analysts’ estimates. Thyssenkrupp AG jumped as much as 11% after Czech billionaire Daniel Kretinsky’s EP Corporate Group agreed to buy a fifth of the German manufacturer’s troubled steel unit.

Meanwhile, at the ECB, Governing Council member Fabio Panetta warned that a return to ultra-low interest rates may be required if cuts aren’t made soon.

As inflation retreats and Europe’s economy struggles, ECB policymakers are on the cusp of lowering rates for the first time since 2019. Whether more cuts follow an initial step planned for June is a source of disagreement, though.

For more on equity markets:

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• US Stock Futures Rise as Microsoft, Alphabet Earnings Lift Mood

• Anglo American ... Australian?: The London Rush

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--With assistance from Michael Msika.

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