European shares experienced a notable surge on Wednesday, driven by positive corporate earnings, although gains were moderated by Novo Nordisk’s disappointing second-quarter operating profit report. The continent-wide STOXX 600 increased by 0.8% to 492.21 points, edging closer to the 500 mark, with all European markets trading positively and most nearing a 1% increase. Healthcare was the sole sector in decline, dipping by 0.1%.
Novo Nordisk saw a 3.4% drop in its shares following a lower-than-expected quarterly operating profit and a reduced annual profit outlook. In contrast, Roche’s shares climbed 1.6% amid reports of the Swiss pharmaceutical company potentially selling cancer data specialist Flatiron Health.
Investors shifted focus to corporate earnings, moving past fears of a U.S. recession that had previously triggered a global equity selloff. Mohit Kumar, Jefferies’ chief economist for Europe, noted that riskier assets gained traction as investors began to re-engage with the market.
With few new catalysts, markets are stabilising, a trend typical for August when trading volumes are generally lighter. Chris Beauchamp, IG Group’s chief market analyst, mentioned that investors are cautious about making significant moves during this traditionally weaker period for stocks.
German industrial orders provided a positive note, rising more than expected in June, which offered some optimism for Europe’s largest economy. The DAX index reflected this, ticking up by 0.8%. Continental, a car parts manufacturer, saw its shares jump 4.7% after exceeding second-quarter expectations. Just Eat Takeaway’s stock soared by 7.2% following an upgrade from J.P. Morgan to “overweight” from “neutral”.
However, not all companies shared in the gains. German sportswear maker Puma’s shares plummeted nearly 13% after narrowing its outlook for full-year core profit. Commerzbank fell 5.5% following a 5% drop in its second-quarter net profit, and Beiersdorf slipped 2.7% despite reporting a 7.1% organic sales growth for the first half of the year.
Later in the day, investors were set to closely watch comments from European Central Bank member Olli Rehn and board member Elizabeth McCaul for insights on the central bank’s future actions.
European shares showed a promising rise due to encouraging corporate earnings, despite setbacks from some major players like Novo Nordisk. The market’s cautious optimism and stabilisation reflect the typical trading behaviour seen in August. Investors remain focused on earnings and economic indicators, waiting for further guidance from central bank officials.
JPMorgan European Discovery Trust plc (LON:JEDT) is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
