London: European shares advanced for a third straight session to hit a one-week high on Thursday, with a raft of forecast-beating company results improving market sentiment and boosting chemical and technology stocks.
Trading was choppy ahead of the Easter holiday, with some investors taking profits from recent gains.
Analysts had a positive outlook for equities, but advised caution as worries related to the euro zone debt crisis and problems in the supply chain following an earthquake in Japan loitered in the background.
At 3:25pm, the FTSEurofirst 300 index of top European shares was up 0.2% at 1,139.84 points after touching 1,140.62, the highest since 12 April.
“After a slow start, earnings have improved quite rapidly and results from the companies such as Intel and Apple have certainly boosted investor sentiment,” said Keith Bowman, equity analyst at Hargreaves Lansdown.
“There is some nervousness in the background, particularly in relation to the situation in Japan and what that means for the supply chain, but as of today the markets have concentrated on good corporate results.”
Chemical shares featured among the top gainers, with Dutch company AkzoNobel rising 4.4% after lifting its first quarter core profit 10% and keeping its full-year forecast. The European sector index rose 1%.
“The company results that have come so far are quite optimistic. The outlook for European stocks in the coming months is slightly positive, but there are uncertainties regarding the euro zone debt situation,” said Ben Hauzenberger, fund manager at Zurich-based Swisscanto Asset Management, which manages about 60 billion Swiss francs ($67.60 billion).
“Given the more optimistic results coming out from cyclical companies, the interest is back there. The technology sector looks quite promising.”
Technology shares extended the previous session’s sharp gains, supported by forecast-beating results from US firm Apple. The European sector index was up 0.7%, while ASML rose 1.9%.
Financial shares rose, with the STOXX Europe 600 banking index gaining 1%. Both Alpha Bank and EFG Eurobank gained more than 4%, tracking the wider market, after sharp declines in the previous session on talks that Greece could restructure its debt.
Goldman Sachs expects a Greek debt restructuring would lead to a hit of up to 41 billion euros in European bank capital, or 3% of their total Tier I capital, though Greek banks would suffer the most.
UBS said it has seen some renewed interest in banks and diversified financials in the past few weeks after recent rights issues in the banking sector and the review of UK banks by the country’s Independent Commission on Banking.
According to client flows from UBS, miners have suffered the highest outflows of any European sector over the past month, with net selling at its highest in five years.
Greek bank shares have fallen more than 16% so far this year after losing 53% last year. By comparison, the European banks index has risen 1.1% year-to-date.
On the downside, telecommunications shares lost ground after Dutch company KPN cut its profit forecast for 2011 and slashed jobs. KPN shares fell 6.4%, while the STOXX Europe 600 Telecom index was down 1.5%.
“The first quarter results will lead the markets in the coming days and weeks, but keep an eye on the most important economic figures for signs of economic weakness,” said Koen De Leus, strategist at KBC Securities, in Brussels.