European stocks inch to record levels buoyed by strong results

Markets rally in Asia but fresh worries over China property sector weigh

Markets have rallied overnight but worries about the Evergrande debt crisis persist. Photograph: iStock

Markets have rallied overnight but worries about the Evergrande debt crisis persist. Photograph: iStock

 

European stocks inched toward record levels on Tuesday as strong results from UBS, Reckitt Benckiser and others added to overall optimism about the third-quarter earnings season.

The pan-European Stoxx 600 rose 0.2 per cent as of 0714 GMT after Asian shares edged higher, drawing comfort from fresh record highs for Wall Street indexes.

The financial services sector rose about 1 per cent as the world’s largest wealth manager, UBS, gained 2.4 per cent after posting its best quarterly profit since 2015, helped by robust trading activity.

Helping UK’s Ftse 100, Lysol cleaning products maker Reckitt Benckiser Group jumped 5.8 per cent after it raised its full-year forecast and beat estimates for third-quarter sales.

Swiss drugmaker Novartis rose 0.8 per cent after reporting a rise in adjusted operating profit and forecasting higher peak sales for its two best-selling pharmaceuticals.

Among decliners, computer peripherals maker Logitech International fell 3.1 per cent after it confirmed full-year earnings outlook and warned of supply-chain disruptions.

Asian stocks largely rallied on Tuesday, following Wall Street’s record highs overnight, though fresh worries about China’s property sector weighed on investors’ sentiments.

MSCI’s gauge of Asia Pacific stocks outside Japan rose 0.15 per cent and briefly touched its highest in six weeks on Tuesday, after gaining throughout October.

The Asian regional benchmark however is down about 11 per cent from its February high compared to the MSCI world equity index which is in sight of its record high hit six weeks ago.

“Equity prices are likely to be driven by technical positioning this week, as trade enters the final week of the month,” said Anderson Alves, an equities trader at global online trading platform ActivTrades.

Japan’s benchmark Nikkei average gained nearly 1.8 per cent , while Australia’s S&P/ASX 200 closed 0.03 per cent higher.

The CSI300 index inched 0.05 per cent higher led by information technology stocks, but the Hong Kong benchmark Hang Seng Index eased 0.4 per cent .

Evergrande crisis

China property stocks extended their losses in the afternoon sessions as another developer, Modern land, defaulted on a payment, adding to worries about spiralling effects of the debt crisis at China Evergrande Group.

An index of Hong Kong-listed mainland property firms dropped 4.7 per cent and the mainland’s CSI 300 Real Estate Index was down 2.4 per cent .

China has said it will roll out a pilot real estate tax in some regions, adding to existing investor concerns about real estate in the mainland.

Edison Pun, Senior Market Analyst at Saxo Markets in Hong Kong noted that markets remained on a strong trend, having begun digesting the prospect that the US Federal Reserve will begin tapering its monetary stimulus in November.

“However, we need to watch whether it will put on extra pressure on the Chinese property market when the property tax is rolled out. It could hurt consumption in the end if we are seeing an overall downturn in Chinese property prices,” he said.

A large proportion of S&P 500 companies are due to report results this week, including technology heavyweights Facebook, Apple, Amazon, Microsoft, and Alphabet, which have been the drivers of the market rally this year.

“Of the S&P 500 firms that have reported this season, the net surprise on earnings has been 13 per cent. So it is easy to understand the optimism percolating through risk appetite despite inflation fears,” said ANZ Research in a note.

“The economy remains very strong. We expect the recovery will re-accelerate once bottlenecks and Covid concerns subside.”

The European Central Bank and Bank of Japan are both set to hold monetary policy meetings on Thursday, although neither are expected to take major action on interest rates. The Dow Jones Industrials and S&P 500 closed at record highs on Monday. Tesla, which jumped 12.66 per cent and breached $1 trillion in market capitalisation, also provided the biggest boost to the S&P 500 and the Nasdaq.

Benchmark 10-year US Treasury notes were steady at 1.6397 per cent off last week’s five month top of 1.7 per cent as uncertainty about when the Federal Reserve would raise rates to curb rising inflation weighed on market sentiment.

The dollar rose 0.1 per cent on Tuesday, recovering from a near one-month trough hit during the previous session.

Already nudging multi-year highs, oil prices rose marginally in a market gripped by tight global supply and strengthening fuel demand in the United States and beyond.

Brent crude futures pared earlier losses to stand at $86.11 a barrel, up 0.14 per cent, while the U.S. West Texas Intermediate (WTI) crude futures edged 0.01 per cent higher to $83.76 a barrel. Spot gold was down nearly 0.2 per cent to around $1,804 per ounce. – Reuters