Frankfurt: European shares recovered to trade slightly higher in a choppy session on Wednesday, with investors pinning hopes on further economic stimulus in the United States, although mixed company results and poor macroeconomic outlook weighed on sentiment.
At 4:40pm, the pan-European FTSEurofirst 300 index was up 0.1% at 925.12 points after falling to a low of 918.75 earlier in the session as some traders said a drop in Germany’s business sentiment was not as bad as expected.
Munich-based Ifo think tank said its business climate index, based on a monthly survey of some 7,000 firms, fell to 108.7, its lowest level in 14 months.
“Response in the market was subdued,” said Jens-Oliver Niklasch, Senior Economist at Landesbank Baden-Wuerttemberg. “Apparently many had anticipated an even stronger decline than consensus,” he added, referring to some whispering numbers that were even more pessimistic.
There was also relief the numbers did not indicate a recession for Europe’s main economic engine, yet.
“For the time being, economic fundamentals look still too sound to fear a fall into recession. The strong labour market with strengthening domestic demand and the high level of backlog orders have become a kind of recession insurance. At least for a couple of months,” said Carsten Brzeski, Senior economist, ING Bank.
Germany’s DAX gained 0.6%, Britain’s FTSE 100 was down 0.1%, and France’s CAC40 gained 0.3%.
Greece’s share benchmark fell 2.7%, hitting its lowest in nearly 15 years, while Greek two-year government bond yields rose to their highest since the launch of the euro in 1999 as an escalating row over demands by Finland for collateral on Greek loans was seen complicating implementation of its rescue package.
Heineken NV , the world’s third largest brewer, shed 11.4% as it said depressed consumer confidence and poor summer weather would hit second-half figures after first-half profit fell short of expectations.
The results helped drag the Europe 600 Food & Beverage index 1.1% lower, with the world’s largest brewer Anheuser-Busch InBev , which recently warned of challenging times in its biggest market the United States, down 2.4%.
Belgium-based insurer Ageas rose 12% as it announced it would start a share buyback programme of its outstanding common stock for a maximum amount of up to €250 million, despite reporting lower-than-expected first-half profit.
Investors held their guns in anticipation of US Federal Reserve chairman Ben Bernanke’s speech at an annual central bank conference in Jackson Hole on Friday, where it is expected he will provide hints for further measures to revive the struggling economy.
“Although fundamental concerns that have been driving the volatility in the markets recently have not been alleviated, and positive impulses are still missing, much is hoped for Ben Bernanke’s speech that could reveal some fresh stimulus including a new round of quantitative easing,” said Anita Paluch, trader at ETX Capital.
Trading volumes were thin, with volumes at 26% of the 90-day average for the FTSEurofirst 300 and the STOXX Europe 600 by midday.
Nine out of 10 STOXX Europe 600 companies due to report in the second-quarter earnings season have done so, with half beating or meeting expectations and half missing them, Thomson Reuters StarMine data showed.
The average earnings miss of those who reported was 22.6%, the data showed, while earnings for the third quarter have subsequently been downgraded by an average 2.9%.