European shares rose on Tuesday helped by stronger defensive stocks as the focus turned to the start of the reporting season which is expected to deliver double-digit earnings growth for the third quarter.
The pan-European STOXX 600 index was up 0.4 percent by 0834 GMT, after hitting a 22-month low in the previous session on the back of risings U.S. Treasury yields and a mix of geopolitical tensions.
Despite the bounce some caution remained after a turbulent start of October that saw the STOXX 600 post on Friday its biggest weekly loss since February. The index remains down 7.4 percent so far this year.
“Investors are… struggling with the ongoing U.S.-China trade war, Brexit talks, Italy’s budget clash with Brussels, EM slow down, and the most recent geopolitical tensions between Saudi Arabia and the U.S.,” said FXTM strategist Hussein Sayed.
Defensive and cheaply valued stocks such as utilities .SX6P and telecoms .SXKP led sectoral gainers with Italian utility Enel (ENEI.MI) up 3.4 percent and Germany’s Deutsche Telekom (DTEGn.DE) up 0.7 percent, while autos also rose strongly despite emission woes hitting Volvo shares.
About 6 percent of STOXX 600 companies are due to report results this week with the earnings season passing its mid-point during the first week of November.
Overall, third-quarter earnings for the index are expected to have risen 14 percent, according to Refinitiv I/B/E/S data, while euro zone earnings are seen up 12 percent. That compares to the 21.6 percent growth seen for U.S. companies.
Meggitt (MGGT.L) was among the biggest gainers in Europe, up 5.6 percent after the engineering firm upgraded its 2018 organic revenue growth guidance, boosted by higher demand for its wheels, brakes, fuel tanks and other aeroplane parts.
Shares in other aero-defense stocks were also gaining: Airbus (AIR.PA), Safran (SAF.PA) and BAE Systems (BAES.L) all rose between 1 and 2 percent.
Bellway (BWY.L) also rose after the British housing developer launched a cost savings program and reported a more than 14 percent rise in full-year pre-tax profit.
Other updates on Tuesday, however, disappointed investors.
BAT (BATS.L) fell 1.3 percent after the world’s second-biggest tobacco company cut its full-year revenue target for next-generation products, citing a flat market in Japan and a product recall in the United States.
Merlin (MERL.L) lost 6.7 percent after its trading update where the tourist group highlighted a disappointing summer performance of its Legoland business.
Mapping company TomTom (TOM2.AS) fell 10 percent as worries over the loss of a contract with Volvo overshadowed a strong update.
Volvo (VOLVb.ST) fell 5.3 percent after the Swedish company warned that some truck engines could be exceeding emission limits because a component was degrading more quickly than expected.