European stocks rise as earnings offset economic gloom

Reuters

Published Oct 25, 2022 03:28AM ET

Updated Oct 25, 2022 04:41AM ET

By Sruthi Shankar

(Reuters) -European stocks rose on Tuesday after a slew of better-than-expected earnings reports helped offset worries about fast rising interest rates and a slowing euro zone economy.

The pan-European STOXX 600 index rose 0.3%, with financial services and technology stocks countering losses in chemical firms.

Boosting financial stocks, UBS climbed 5.6% after the Swiss bank beat market expectations for quarterly profit due to a rise in new money inflows.

SAP gained 4.1% after the German business software maker reported faster-than-expected revenue growth for the third quarter, while Logitech (NASDAQ:LOGI) International rose 6.4% after the computer peripherals maker reaffirmed its full-year forecast.

Overall, the quarterly updates helped lift sentiment despite lingering worries about a European recession as consumers and businesses buckle under pressure from surging inflation and higher borrowing costs to tame it.

Earnings from tech giants Microsoft Corp (NASDAQ:MSFT), Google-owner Alphabet (NASDAQ:GOOGL) Inc and Apple Inc (NASDAQ:AAPL) will set the tone on Wall Street this week.

"Our focus is on the forward outlook for Q4 and 2023 EPS, which has now started to fall, even though we believe it still to be at optimistic levels and thus subject to further cuts as companies report," said Leonardo Pellandini, equity strategist at Julius Baer.

"We reiterate our defensive positioning for the time being given the imminent slowdown in macroeconomic momentum."

Of the 20% of STOXX 600 companies that have reported third-quarter results so far, 55% have beat analysts' profit estimates, as per Refinitiv IBES data. In a typical quarter, 53% top estimates.

While European corporate earnings are expected to grow 28.4% in the third quarter, it is seen up 18.2% in the fourth quarter and just 3.1% in the first quarter of 2023.

The European Central Bank (ECB) is widely expected to deliver a second straight 75 basis point rate hike this week, but a recent report suggesting the U.S. Federal Reserve might slow its pace of rate hikes has raised hopes of a pivot from the ECB too.