Slew of upbeat earnings lift European stocks

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany

European shares climbed on Thursday, as investors brushed off simmering U.S.-China tensions and focused on better-than-expected earnings reports from companies such as Unilever, Daimler and Publicis.

The pan-European STOXX 600 index rose 0.7%, with automakers .SXAP surging 3.4% after Germany’s Daimler AG (DAIGn.DE) forecast a rise in operating profit at its Mercedes-Benz cars and vans division in 2020 as sales rebound.

Unilever (ULVR.L) was the biggest boost to the STOXX 600 with a 7.8% jump as its second-quarter sales fell far less than feared. Shares in Nestle SA (NESN.S) and Danone SA (DANO.PA) rose nearly 2% each.

“It is a welcome relief that things are less bad than feared as pricing is positive and volumes are not a disaster,” Mark Taylor, a sales trader at Mirabaud Securities wrote about Unilever’s report.

European stocks broke this week’s winning run on Wednesday after the United States abruptly told China to close its consulate in Houston amid accusations of spying, escalating tensions between the world’s two biggest economies.

“While we continue to watch how the situation evolves, and expect China to announce its official retaliation measures soon, we lean towards a restrained tension escalation,” Citi analysts wrote in a note.

The STOXX 600 is on track to end with weekly gains as hopes of a COVID-19 vaccine and optimism around a European Union recovery fund pushed the benchmark index to early March highs.

Publicis Groupe SA (PUBP.PA), the world’s third-biggest advertising company, surged 15.5% after it beat market expectations for underlying sales in the second quarter.

Chipmaker STMicroelectronics NV (STM.BN) (STM.PA) gained 3.9% as it raised its full-year net revenue outlook, but Swiss drugmaker Roche Holding AG (ROG.S) fell 1.5% as second-quarter sales tumbled nearly 10%.

Companies listed on the STOXX 600 are expected to report a 58.6% drop in second-quarter earnings, but many investors believe there is a big margin for error, given analysts in many cases had no precise outlook to factor into their estimates.

Online trading firm IG Group (IGG.L) slid 6.7% despite reporting a 52% rise in annual profit.

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