(Reuters) - A rally in banking shares helped European shares end at seven-week highs on Tuesday, with further optimism kindled by signs that several economies were starting to ease coronavirus-driven lockdowns. The pan-European STOXX 600 closed up 1.7% on largely broad-based gains.
A 40% jump in first-quarter profit for UBS, the world’s largest wealth manager, and a 4.2% in Spain’s Santander despite an 82% slump in quarterly net profit lifted Europe’s battered banking sector to its highest point in two weeks.
“We’ve come to a point with regard to European banks where expectations have fallen so much because of the uncertainty, but the earnings look stable excluding the loan loss provisions,” said Craig Erlam, senior market analyst at Oanda.
UK-based HSBC Holdings Plc’s shares rallied 1% but it warned of more earnings pain ahead as it set aside a hefty $3 billion in bad loan provisions due to the COVID-19 pandemic.
“Banks tend to reassess their credit books at the end of a year, so the fact that HSBC felt the need to join the big four Main Street banks in the U.S. in taking a cautious view so early on shows how difficult 2020 is likely to be,” said Russ Mould, AJ Bell Investment Director.
Companies listed on the STOXX 600 are expected to report a near 25% decline in first-quarter profits, according to Refinitiv data.
Drugmaker Novartis reported growth in quarterly sales and confirmed its 2020 targets, but the stock gave up session gains after its chief executive warned of a tapering buying rush for its products and a decline in M&A activity in the sector due to the pandemic.
The healthcare sector was the only sectoral decliner, down 0.1%. Roche Holding, however, gained 0.9% on positive data from its treatment for spinal muscular atrophy.
On Wall Street, all eyes will be on reports from heavyweights such as Apple and Amazon.com this week.
The Swiss stock index got a boost from a 5.3% jump in ABB after the engineering company reported first-quarter results topped expectations.
European stocks have recovered more than 25% from mid-March lows, following unprecedented measures from major central banks and governments to support the global economy and, more recently, on signs that many countries such as Italy and Spain plan to restart their economies.
But Britain stood firm on not lifting its lockdown, with the country on track to become one of Europe’s worst hit by the pandemic.
London-based BP forecast significantly lower refining margins in the second quarter and its first-quarter profits tumbled by two-thirds. But shares of the oil major retraced losses as Brent crude prices rose. [O/R]
Germany’s Wirecard plunged 26.1% after an investigation by auditor KPMG found the payments company did not provide sufficient documentation to address all allegations of accounting irregularities made by the Financial Times.
Reporting by Sruthi Shankar in Bengaluru; Editing by Sriraj Kalluvila; Editing by Mark Heinrich