Europe midday: Shares rally on positive earnings
European shares pulled themselves into marginally positive territory at lunch on Tuesday as strong earnings figures from BP and HSBC provided enough impetus to offset worries about rising coronavirus infections and further delays of a US stimulus package.
The STOXX 600 was flat with the banking sector up, boosted by HSBC and Banco Santander. US futures had also made some gains, after a pummelling for Wall Street overnight.
German Chancellor Angela Merkel on Monday said her country was on the verge of losing control of its fight against coronavirus, telling colleagues in her Christian Democratic Union party 'the situation is threatening' and 'every day counts' as a further 8,685 cases were confirmed in the country on Monday.
Italians protested on Monday night after stricter measures were introduced, including a 6pm closures of bars and restaurants. Intensive care capacity in the Paris region was at two thirds.
“It's difficult to escape the feeling that investors are undergoing much higher levels of apprehension about how events over the next few days, as well as the next few weeks are likely to play out, with respect to the prospect of tighter restrictions and new lockdowns,” said CMC Markets analyst Michael Hewson.
“The penny appears to have finally dropped that US politicians have little intention of putting together any form of consensus stimulus plan, with the events of recent weeks being nothing more than optics for US voters.”
“While the prospect of a delay to new US stimulus measures is spooking investors in the US, events in Europe aren’t looking particularly rosy either, with events in France, Spain and Italy suggesting that the virus is starting to run out of control again, as infection rates accelerate exponentially, and hospital admission rates start to rise sharply.”
In equity news, Capgemini shares gave up some early gains but were still almost 4% higher as the French consulting and IT services provider posted an 18.4% increase in third quarter revenues and said it expected the fourth quarter to show a further but limited improvement.
HSBC shares were up after the bank said it planned to move to a fee-based businesses model as it unveiled a less-than-expected 35% fall in third quarter profits. Pre-tax profit for the three months to 30 September came in at $3.1bn, compared with a $2.07bn average of analysts' estimates compiled by the bank.
HSBC also said that losses from bad loans were forecast to be at the lower end of the $8bn to $13bn range set out earlier this year.
Other banks followed suit, with Standard Chartered, Lloyds, NatWest and Barclays all higher.
Spanish bank Santander rose as it forecast an improvement of core profits for 2020, citing better customer behaviour in expired loan payments and more cost savings in Europe after it swung back to the black in the third quarter.
Statutory net profit trebled in the third quarter compared to a year ago, however, on an underlying basis profit fell 18% in the same period to €1.75bn due to more coronavirus related provisions.
Oil giant BP rallied as it turned in a profit of $100m on a replacement cost basis, despite a "significantly" lower result in its oil trading arm, following the prior quarter's $6.7bn loss.