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European Stocks Rise as Strong Earnings Spark Risk-On Rebound

(Goldman Sachs, Bloomberg)

(Bloomberg) -- European stocks rose on Monday as robust earnings updates outweighed recent concerns over the possibility of US trade tariffs.

The Stoxx Europe 600 Index advanced 1.1% to the highest closing level this month after a firm risk-on rally took hold. Cyclical sectors led the gains with construction stocks, banks and industrials in the driving seat.

Among individual movers, Continental AG shares rallied after the German auto parts maker reported earnings and Hannover Re shares advanced as the reinsurer raised its 2024 profit target. Croda International Plc was another strong gainer after the chemicals maker reconfirmed its outlook.

Natwest Group Plc rose after the lender bought back £1 billion ($1.29 billion) of its shares from the UK government. Delivery Hero SE’s shares also advanced after the food delivery firm unveiled plans to list its Talabat unit in Dubai.

European equities have been under pressure of late, and Donald Trump’s US election victory has fueled heightened worries over the prospect of a trade war given his plans to impose import duties on goods manufactured outside of the US. Export-reliant companies have also underperformed amid disappointment over China’s measures to stimulate its economy. 

“Since the election we have seen that the European market clearly underperformed the US market,” said Marcus Poppe, co-head of European Equities at DWS Investment GmbH. “The biggest risk for the European market was, especially also for the German market, the tariffs discussion coming up again. I think that’s the Damocles sword hanging over the market.”

The next leg for European equities hangs on clarification on Trump’s tariffs plan, as well as Chinese measures to boost its economy and consumer demand, Poppe added. 

Investor attention will now likely turn to US inflation data due later in the week, as well as a reading for German investor confidence.

For more on equity markets:

  • Political Risk Turns Into Opportunity in Germany: Taking Stock
  • M&A Watch Europe: ENI, Grifols, NatWest, Cellnex, Anima, Thule
  • US Stock Futures Little Changed

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--With assistance from Michael Msika and Sagarika Jaisinghani.

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