Europe midday: H&M, STMicroelectronics earnings boost sentiment

European stocks maintained their upbeat mood on the first day of the final quarter of the year as better-than-expected earnings news from H&M and STMicroelectronics and US stimulus package hopes boosted sentiment.

The pan-European Stoxx Europe 600 was up 0.46% at midday on Thursday, with all major European bourses in positive territory.

Shares were also boosted by a final reading of German manufacturing activity in September which showed an accelerating recovery from the Covid-19 impact, with IHS Markit’s Purchasing Managers index (PMI) rising to 56.4, even though it was below a flash estimate of 56.6.

Spanish and French PMI readings were better than expected, while the broader euro zone recovery was in line with expectations.

In the US, Treasury Secretary Steven Mnuchin said he was willing to make a final effort at brokering a deal with the Democrats on the proposed coronavirus relief package. The Democrats have put forward a package worth $2.2trln, far more than the $1.5trln proposed by the Republicans.

“To an extent, there isn’t a huge amount of pressure on the Trump administration to reach a deal as the unemployment rate in August fell to 8.4%. Yesterday, the US posted solid economic indicators, so that might hold back the Republicans from compromising too much,” said CMC Markets analyst David Madden.

Shares in Swedish fashion chain H&M rose more than 7% as the company said it had hurdled the worst effects of the Covid-19 pandemic with better-than-expected third-quarter earnings.

Computer chipmaker STMicroelectronics was up 5.9% after stronger-than-forecast third-quarter revenue of $2.67bn.

Sector peers Infineon Technologies, Dialog Semiconductor and ASM International all gained on the news.

Halfords shares soared by 20% as the company lifted earnings guidance after a boom in bicycle sales during the summer period as Britons vacationed at home.

Bayer shares plunged 12% as the German pharmaceutical and chemicals company said 2021 core earnings would be slightly lower. The company said lower commodity prices were hurting sales.

Rolls-Royce shares fell 5.2% as the UK aircraft engine maker said it would tap shareholders for £2bn through a heavily discounted rights issue and also raise another £3bn in bonds and loans.