Europe close: Stocks start Q2 on front foot helped by economic data

European shares started the new quarter on the front foot, helped by a raft of better-than-expected economic data and positive corporate news.

Several analysts were also out with relatively upbeat views regarding the risks to the European economy from the Covid-19 Delta variant.

The pan-European Stoxx was up 0.62% to 455.63, with Germany’s DAX up 0.47% alongside to 15,603.81, after official data revealed retail sales in the country rebounded in May as a gradual easing of Covid-19 restrictions supported consumer spending in Europe's largest economy.

Spain's Ibex 35 was the biggest outperformer, adding 1.26% to 8,932.3.

Retail sales rose 4.2% month on month in real terms after a downwardly revised decline of 6.8% in April, the Federal Statistics Office said (consensus: 4.8%).

Separately, Eurostat reported a drop in euro area unemployment from 8.1% in April to 7.9% in May (consensus: 8.0%) and IHS Markit revised its June factory PMI for the single currency bloc from 63.1 to 63.4.

“European and global stock markets have enjoyed a strong run-up in the last six months as a combination of ultra-loose monetary policy, fiscal largesse and a vaccine-enabled reopening of economies allowed investors to look ahead to a brighter future for earnings and growth,” said Markets.com analyst Neil Wilson.

“Now there are risks on the horizon, but the market remains biased to the upside. That’s been evidenced by fresh record highs on Wall Street as the S&P 500 notched its fifth-straight record closing high.”

In equity news, shares in Aveva rose 3% as the industrial software group reported a good start to the year as the set itself a target of 10% annual revenue growth over five years.

Associated British Foods was higher by 5% as the company said it expected annual profit to be in line with the year before after sales at Primark outstripped forecasts in the third quarter.

JD Sports Fashion shares gained 5% after the company said it expected to make annual profits of at least £550m and would split the roles of chairman and chief executive before its 2022 annual general meeting.

Micro Focus International shares fell 15% as the company reported adjusted first-half profit down 7.7% as the software group's revenue fell.

Fashion retailer H&M was down 1% despite reporting better-than-expected second quarter profit as many of the company's stores reopened but earnings remained well below pre-pandemic levels.