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Earnings propel European shares higher

Published 04/21/2011, 01:07 PM
Updated 04/21/2011, 01:12 PM
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(European stock markets will be closed for Easter on Friday and Monday. Coverage will resume on Tuesday)

* FTSEurofirst 300 index closes 0.4 percent higher

* AkzoNobel up as profit rises

* Miners up as metals prices rise, with gold at record

By Brian Gorman

LONDON, April 21 (Reuters) - European shares closed at their highest in more than a week on Thursday as earnings from the likes of AkzoNobel and U.S. tech bellwether Apple helped eclipse economic worries.

The pan-European FTSEurofirst 300 index of top shares rose 0.4 percent to 1,142.56 points, the highest close since April 11. Over the shortened week, the index gained 1 percent, recovering from a fall on Monday when Standard & Poor's lowered its outlook for U.S. debt to negative. Paints and chemicals group AkzoNobel NV gained 4 percent after first-quarter core profit rose 10 percent, and it pledged more price rises to offset higher costs.

"There's some strength in the earnings coming through. While we have some macro stresses and strains, notably what is going on in the euro zone peripherals, the earnings season is keeping the markets reasonably stable," said Richard Batty, strategist at Standard Life Investments, part of the Standard Life Group, which administers $324 billion of assets.

Of the 100 S&P 500 companies that have reported first-quarter earnings so far, 78 percent of them have either beaten or met market expectations, with the remainder below forecasts, data from Thomson Reuters StarMine showed.

Shares of Apple Inc jumped 4 percent on roaring iPhone sales and a backlog of demand for its iPad tablets.

The heavyweight banking sector gained 1.5 percent, helped by better-than-expected results at U.S. peer Morgan Stanley. Italian banks were the standout risers, with Intesa SanPaolo and UniCredit up 4.2 and 4.5 percent, respectively.

Investment bank Macquarie reiterated its "outperform" rating on Intesa, describing it as "a solid, well-capitalised bank ... a safe dividend and a payout above 40 percent".

But it added: "We stay cautious on Italian banks due to their poor profitability and due to possible stock overhang, following the announced 10 billion euros capital raisings."

Worries over Greek debt restructuring continues to be a threat for banks.

They are also expected to keep pressure on rattled peripheral bond markets into next week, resulting in yields -- already at euro lifetime highs -- continuing to push higher.

SCHNEIDER RISES

Among other companies, French electronic engineering company Schneider Electric rose 2.7 percent after posting a 27 percent rise in first-quarter sales on Tuesday, helped by emerging markets, and confirmed its sales and profitability targets for the full year.

But telecoms were left out of Thursday's rally. Dutch firm KPN dropped 8.3 percent after it scaled back its 2011 profit forecast.

This contributed to weakness elsewhere in the sector, pulling heavyweight Vodafone down 4.3 percent.

Gold prices hit record highs for a fifth session on Thursday, and silver rallied to its strongest since 1980 as the dollar slid to a three-year low against a basket of major currencies.

Base metals prices also rose. Miners to gain included Fresnillo and Kazakhmys, up 2.2 and 2.1 percent.

Across Europe, Britain's FTSE 100 fell 0.1 percent; Germany's DAX and France's CAC40 rose 0.6 and 0.4 percent, respectively.

"One thing I worry about is that corporate operating margins are at or close to all-time highs," said Jacob de Tusch-Lec, manager of the 32 million pound Artemis Global Income fund.

"I'm not one of those fund managers who say it's great because margins are so high, I actually think it can only get worse from here." (Additional reporting by Simon Jessop; Editing by Will Waterman)

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