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Defensives, upbeat earnings lift European shares

European shares edged higher on Tuesday, led by defensive stocks and a clutch of upbeat earnings reports as investors worried about the risk of resurgence in new coronavirus cases due to the lifting of lockdowns by some countries.

The pan-European STOXX 600 index rose 0.2%, with gains led by telecoms, healthcare and utilities <.SX6P> – sectors that investors seek during times of economic uncertainty.

Boosting UK’s FTSE 100, Vodafone’s shares jumped 5.9% after the world’s second-largest mobile operator met expectations with a 2.6% rise in full-year core earnings and maintained its dividend payout.

Logistics group Deutsche Post AG gained 3.1% as it saw signs of business normalising in Europe after the pandemic depressed global freight volumes in the first quarter.

The steady rise in Europe followed a risk-averse mood in Asian trading hours after the Chinese city of Wuhan, where the pandemic originated, reported its first new cases since its lockdown was lifted.

South Korea and Germany were among countries that reported an acceleration in new cases after steps to loosen restrictions.

“The key variables at the moment are recovery in economic activity and the impact of getting people out of their homes on the spread of the virus,” said Toby Gibb, global head of investment directing at Fidelity International.

“I think we will be (stuck between the two) for sometime.”

After a strong rebound in April that helped the STOXX 600 climb 26% from March lows, European shares have lost some momentum in May as investors fear the economic recovery may not be as fast as thought.

German conglomerate Thyssenkrupp slumped 11.6% as it warned its operating loss could swell to 1 billion euros ($1.1 billion) in the current quarter due to the pandemic.

Checking gains on Germany’s DAX, insurer Allianz dropped 2.7% as it posted a 29% fall in quarterly net profit as the coronavirus outbreak slows business.

Adding to the unease, Chinese state-run newspaper reported that some government advisers in Beijing were urging fresh talks over the U.S.-China “Phase 1” deal and possibly invalidating the agreement.

Among other bright spots, German broadcaster ProSiebenSat.1 Media surged 14.8% to the top of STOXX 600 after U.S. private equity house KKR revealed that it had acquired a stake of 5.2% in the struggling company.
Source: Reuters (Reporting by Sruthi Shankar in Bengaluru; Editing by Anil D’Silva)

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