European shares ended higher yesterday as short covering kicked in ahead of a long Easter weekend and strong quarterly results including those from Unilever and Nestle tempered data showing eurozone businesses unexpectedly slowed this month.
The pan-European STOXX 600 index rose for a seventh straight session, its best winning streak since early February with Germany’s DAX closing at six-month highs, while London’s FTSE 100 fell, dragged by healthcare stocks.
Growth worries gripped equity markets in the early hours after surveys showed businesses across the eurozone stumbled into the second quarter as demand remained weak despite more modest price rises.
The data came on the heels of the German government lowering its forecast for 2019 economic growth on Wednesday, which was overshadowed by better-than-expected economic data out of China.
Markets however turned to end higher as a weaker euro and short covering ahead of Easter holidays benefited stocks.
“There is so much pessimism around Europe that the negative PMI data failed to find fresh sellers, triggering short-covering,” said Giuseppe Sersale, fund manager at Anthilia Capital in Milan.
A survey of fund managers by Bank of America Merrill Lynch (BAML) found earlier this week that short positioning on European equities was the “most crowded trade” for the second straight month in April.
Earnings boosts from key industrial and consumer companies in the region also helped lifted STOXX with Schneider Electric providing the biggest impetus after the French company beat first-quarter sales forecasts.
Amsterdam-listed shares of Unilever hit a life-high after the consumer goods group reported stronger than expected quarterly underlying sales growth, helped by increased prices and volume.
Also boosting consumer stocks was Nestle on higher-than-expected sales growth in Q1.
But Kering dropped 3.6% on signs of a slowdown at the French fashion company’s Gucci brand.
Sandvik led gains on the STOXX after reporting a better than forecast quarterly order intake and said demand remained strong across all its business areas, sending an upbeat signal for the Nordic industrial sector.
The grim PMI data had a negative impact on the euro and the German 10-year bund yields, which fell further.
The banking index barely moved after five strong sessions.
Healthcare stocks were the biggest drag with Novo Nordisk, AstraZeneca and GlaxoSmithKline all sliding following a sell-off in US healthcare stocks over regulatory worries on Wednesday.
The US is among the biggest markets for European drugmakers.
Osram was the biggest percentage loser on the STOXX 600 after a German magazine reported that private equity groups Bain and Carlyle were losing confidence in their bid for the lighting group.
British American Tobacco shed 1.4% and Imperial Brands gave up 0.8% after US
Senate Majority leader Mitch McConnell said he planned to introduce legislation to raise the minimum age for buying tobacco products.
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