European equities tentative as pound makes brief rally

European stocks made little headway yesterday amid a flurry of company earnings reports, while a rally by the British pound after better-than-expected economic growth data proved short lived.
“Stock markets are going through a period of churn as investors digest a slew of corporate results, notably from European banks and US tech firms,” Jasper Lawler, analyst at CMC markets, said in an investors’ note.
“The FTSE 100, like the other main European indices, reversed early losses to make small gains, helped by a rebound in oil prices,” he added.
London stocks closed 0.4% higher at 6,986.57 points, while Frankfurt’s DAX was up 0.1% at 10,717.08, and the CAC in Paris was little changed, at 0.02% lower at 4,533.57.
Sterling bounced after official data showed that Britain’s economy grew by 0.5% in the three months following the country’s referendum in favour of exiting the European Union.
The currency shot as high as $1.2272 and strengthened to just above 89 pence against the euro in morning deals, before trimming gains.
Capital Economics’ John Higgins said the GDP figures as well as Japanese carmaker Nissan’s decision to continue investing in Britain and a breakthrough on a Canada-EU trade pact “have not assuaged the doom-mongers’ concerns, judging by sterling’s failure to hold on to a short-lived gain”.
“This presumably reflects the fact that the GDP figures showed continued weakness in the export-orientated manufacturing sector and the naysayers’ view that the recent calm in the economy will inevitably be followed by a storm,” he said in an investors’ note.
A stronger pound weighs on exporters, making their goods more expensive for buyers using weaker currencies.
Shares in Barclays Bank rallied to the top of the FTSE 100 risers’ board, as investors shrugged off rising mis-selling costs and flat net profits to focus on news of a jump in underlying pretax earnings.
Deutsche Bank shares firmed 0.6% to €13.38 at close, after the troubled German lender posted a surprise third-quarter net profit.
Deutsche’s financial health has been in the spotlight ever since the US Department of Justice last month sought an unaffordable $14bn fine over its role in the subprime mortgage crisis – sparking fears it might have to raise fresh capital.
“A surprise move into profit for Deutsche Bank has allayed some of the fears that sent shares in Germany’s biggest bank into free fall,” noted IG analyst Joshua Mahony.
US stocks rose modestly following a plethora of mostly solid earnings, including from Tesla Motors and Twitter.
In other corporate news, US semiconductor maker Qualcomm said it would buy Dutch rival NXP in a $47bn megadeal, sending shares in both higher.