European stocks gain after July drop on manufacturing growth

Bloomberg

European equities climbed after falling the most since March in July as euro-area manufacturing returned to growth.
The Stoxx Europe 600 Index was up 0.2%, led higher by the media and tech sectors. Banks were the worst performers, with HSBC Holdings Plc down 3.8% after first-half pretax profit missed estimates and more than halved to $5.6 billion, while Societe Generale SA declined 2.1% after swinging to a surprise 1.26 billion-euro ($1.5 billion) loss because of charges at its trading unit.
Europe had positive economic news on Monday morning, as factories across the euro area saw an even stronger return to growth in July than initially reported, marking the region’s first manufacturing
expansion in one-and-a-half years. This could provide stock investors with the impetus to keep the rally going after the market last month posted its worst sell-off since the March turmoil amid concern over the pace of the global economic recovery and as some of the region’s biggest companies issued profit warnings.
“If one considers that the economy is due to rebound next year and continue to do so — and earnings should rebound significantly – yes, markets look attractive, and especially the EU one,” said Stephane Ekolo, an equity strategist at TFS Derivatives in London.
The Covid-19 pandemic continues to pose a risk as cases in some US states rise and US-China tensions are also in focus because the Trump administration is expected to announce measures against Chinese-owned software deemed to pose national-security risks.
“The unknown is once again the Covid-19 and when/if we are going to find a workable vaccine,” Ekolo said.
As the earnings season continues, Morgan Stanley strategists said in a note that 50% of European companies have beaten earnings-per-share estimates by 5% or more, while 30% have missed, resulting in a “strong” net beat of 20% of firms.