European stocks rise as traders weigh flurry of earnings

Bloomberg

European stocks gained as a flurry of corporate earnings reassured investors that profits can overcome economic hurdles.
The Stoxx Europe 600 climbed 0.4% in London. Banking and technology shares soared, tracking a rally in US stocks. Miners underperformed as metals fall.
ASML Holding NV advanced after saying demand for its chip-making machines outstripped supply in the second quarter. Danone SA soared after reporting its fastest sales growth in seven years, and following a report that rival Lactalis may be interested in buying its businesses. Heineken NV advanced after sales came ahead of estimates. Just Eat Takeaway.com NV rises after saying it’s considering a partial or full sale of its Grubhub unit.
European equities have been under pressure this year as various risks from hawkish central banks to the war in Ukraine threaten to hurt the economy, with the International Monetary Fund (IMF) slashing its world growth forecast. Investors are now looking to earnings and corporate guidance to assess whether companies can overcome rising headwinds, including surging inflation.
Global stock and bond markets are at risk of a sell-off because central banks including the Federal Reserve may be forced to raise interest rates more than investors anticipate to tame inflation, a top IMF official said.
The odds of a major market sell-off would be increased if monetary policy tightening is combined with a recession, Tobias Adrian, director of the IMF’s monetary and capital markets department and a former senior vice president of the Federal Reserve Bank of New York, said in an interview.
The IMF sees inflation for this year at 5.7% in advanced economies and 8.7% in emerging and developing countries, significantly higher than just a few months ago. The pace of consumer-price increases is expected to slow to 2.5% and 6.5% respectively in each group of nations in 2023. The IMF cited a rising risk that inflation expectations become unanchored, prompting more aggressive central bank tightening.
In the US and some parts of Europe, inflation is accelerating at the fastest pace in decades, spurring expectations for central banks to tighten monetary policy more quickly than previously foreseen.
“Given higher inflation and slowing growth the upside potential for equities seems to be limited,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. He doesn’t expect a sharp selloff in the near term either as positioning and sentiment are already bearish and first quarter results are not worse than expected.
Investors will be watching the TV debate between French President Emmanuel Macron and nationalist leader Marine le Pen tonight just days before the final ballot of the presidential election this weekend. From Citigroup Inc. to asset manager Amundi SA, the warnings are piling up that markets are underestimating the risk of a surprise.