European stocks are on track for their best week since late June, with the Stoxx Europe 600 up 1.4% on the week as a stronger-than-expected earnings season pushes regional benchmarks to fresh record highs. Falling bond yields and a pullback in oil prices added support, but a new Iranian legislative move targeting Strait of Hormuz shipping tempered sentiment on Friday.
European equities edged higher on Friday, putting the region on course for its best week since late June. The pan-European Stoxx Europe 600 Index rose 0.2% in early trading, leaving it on track for a 1.4% weekly gain — its strongest five-day run in nearly six weeks.
Earnings beat lifts benchmarks to records
Strong corporate earnings have pushed European benchmarks to consecutive record highs this week. Germany's DAX gained 0.3%, while France's CAC 40 and London's FTSE 100 each rose 0.2%.
Aggregate STOXX 600 earnings are now tracking growth of nearly 21% year-over-year, a sharp upward revision from the 12.5% expansion estimated at the start of the quarter. Robust second-quarter reporting across pharmaceuticals, power infrastructure and telecommunications anchored the benchmarks' push into record territory, giving equity desks a firmer fundamental case to stay invested.
Falling yields and cheaper oil add support
A retreat in sovereign bond yields, alongside crude oil prices pulling back from recent peaks, added further support to the week's advance. The pullback relieved cost pressures across energy-intensive sectors.
Hormuz risk resurfaces, Genel rejects a bid
However, geopolitical risk resurfaced in Friday trading. Iranian lawmakers are reviewing a preliminary bill that would bar U.S., Israeli and other designated "hostile" vessels from transiting the Strait of Hormuz, a waterway that carries a fifth of global petroleum. The bill threatens to complicate diplomatic mediation led by Oman and Qatar aimed at restoring maritime security. Separately, Genel Energy shares gained 12% after rejecting a takeover approach.
Payrolls data looms over the Fed's rate path
Trading desks are bracing for the U.S. Labor Department's July nonfarm payrolls report. Economists project a rebound in U.S. job creation alongside an unchanged unemployment rate of 4.2%, a result that would confirm labor-market resilience. That would keep the Federal Reserve focused on curbing inflation.
Markets currently price roughly an even chance of a 25-basis-point Fed rate hike at the Sept. 16 meeting. European investors are watching the U.S. data closely to gauge whether American economic strength will keep borrowing costs elevated across global markets into the autumn.
Source: Investing.com
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