European stocks flat despite rise in cyclicals

Investors are awaiting the start of the US earnings season this week as well as clarity on fiscal spending plans under incoming US President Joe Biden, who takes office on January 20. — Reuters pic
Investors are awaiting the start of the US earnings season this week as well as clarity on fiscal spending plans under incoming US President Joe Biden, who takes office on January 20. — Reuters pic

NEW YORK, Jan 13 — European stocks closed flat yesterday, with economically sensitive sectors including banks, automakers and oil supporting markets across the continent.

The regional STOXX 600 index closed up 0.05 per cent after a mixed session, while Germany’s DAX rose 0.1 per cent, France’s CAC inched 0.2 per cent lower and Britain’s FTSE 100 fell 0.7 per cent.

Investors are awaiting the start of the US earnings season this week as well as clarity on fiscal spending plans under incoming US President Joe Biden, who takes office on January 20.

In Europe, automakers jumped 1.7 per cent to lead gains after Renault, BMW and VW reported 2020 sales.

Their US carmaking rivals also got a boost after General Motors announced its entry into the growing electric delivery vehicle business.

Other cyclicals such as banks, travel and leisure and oil and gas extended last week’s rally on hopes that a larger US stimulus under the incoming Biden administration will spur faster economic recovery.

Oil majors BP and Royal Dutch Shell gained close to 2 per cent as crude prices hit an 11-month high on tighter supply and expectations for a drop in US inventories.

Still, losses in defensive sectors such as healthcare, utilities and consumer staples checked gains in most markets.

“Investors are still wondering where the next big catalyst for further upside will come from, and are painfully aware that the Covid-19 crisis remains untamed despite the introduction of vaccination programmes,” Chris Beauchamp, chief market analyst at IG wrote in a client note.

Britain’s exporter-heavy FTSE 100 underperformed other European markets, hit by a stronger pound and a surge in new Covid-19 cases.

Companies listed on Europe’s STOXX 600 are expected to report a 26.3 per cent drop in fourth-quarter earnings, data from Refinitiv I/B/E/S shows, as restrictions to control soaring coronavirus cases slowed an economic recovery.

That comes ahead of a clear improvement predicted for the first two quarters of 2021, when earnings are set to rise 40.4 per cent and 75.1 per cent respectively.

Maersk rose 3.4 per cent after brokerage Berenberg upgraded the Danish shipping company’s shares to “buy”, saying earnings momentum driven by freight prices could see it run higher.

Swiss online pharmacy chain Zur Rose hit a record high, surging almost 15 per cent to the top of STOXX 600, after BofA Global Research started coverage with “buy” rating. — Reuters

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