By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets posted their
longest winning streak of the year on Thursday, after U.K.
economic-growth data beat expectations, showing the nation didn't
slip into a triple-dip recession.
The Stoxx Europe 600 index rose 0.8% to close at 296.88,
extending gains into a fifth straight session.
Shares of British American Tobacco PLC (BTI) added 1.2%, after
the firm said first-quarter revenue went up 5% at constant exchange
rates. Additionally, the board said it's confident of another year
of earnings growth in line with long-term strategic goals.
Shares of Kazakhmys PLC jumped 4.3%. The miner said it's on
track to meet its full-year copper output target.
Shares of Banco Santander SA (SAN) dropped 2.4%, after the bank
said first-quarter net profit dropped 26%, hit by tough economic
conditions in key markets, especially Spain and the U.K.
European stocks erased losses in midmorning action after data
from the U.K. Office for National Statistics showed the economy
expanded by 0.3% in the first quarter, exceeding expectations of
0.1% growth. A negative reading would have pushed the U.K. economy
into a recession for the third time in five years. The pound
(GBPUSD) rallied after the news, rising to $1.5441 from trading
around $1.53 ahead of the data and up from $1.5265 in late North
America trade on Wednesday.
Rate cut speculation
Other recent data from the euro zone weren't as upbeat, however,
stoking speculation of a 25-basis-point rate cut at the European
Central Bank's policy meeting next week. On Wednesday, data showed
business confidence slipped in Germany in April, following downbeat
purchasing managers' indexes the prior day.
"Many economists are pointing out that a short period of bad
data may just encourage policy officials to maintain or even
enhance current stimulus measures," said Shavaz Dhalla, financial
trader at Spreadex, in a note.
"However, investors need to remain on guard to such an argument,
as accepting poor data because it can lead to more stimulus
measures does not solve the problem in the long term," he said.
Guy Foster, head of portfolio strategy at Brewin Dolphin, said a
rate cut next week looks "baked in", but markets will, more
importantly, be monitoring what the ECB can do beyond that.
"They'll be looking at how they can boost lending to small and
midsize companies. They are trying to identify what features they
can borrow from the Bank of England's Funding for Lending Scheme,"
he said.
He said the euro zone could benefit from a potential shift in
Germany's perception of easing measures, with general elections in
September approaching amid signals Europe's growth woes are
spreading to the region's powerhouse.
"There has been big resistance to unconventional monetary policy
and Germany broadly objects to everything. But when you're months
from an election and you need to provide stimulus to boost the
economy, you will see a more pragmatic approach to monetary
policy," he said. "We expect to see a softer stance on austerity."
U.S. stocks traded higher on Wall Street, after
better-than-expected data on weekly jobless claims.
Movers
Among country-specific indexes, the U.K.'s FTSE 100 index closed
0.2% higher at 6,442.59.
Shares of Unilever PLC (UL) slid 3%, after the consumer-goods
firm reported first-quarter sales growth below expectations, as
slowing North America growth and a weak start to ice cream
purchases in Europe added pressure.
AstraZeneca PLC (AZN) lost 1.9%, after the drug maker reported a
36% drop in first-quarter pretax profit, falling short of analysts'
expectations.
Shares of Vodafone Group PLC (VOD) added 1.7%, after a media
report said Verizon Communications Inc. (VZ) plans to bid for joint
venture Verizon Wireless. Verizon declined to comment on the
report.
France's CAC 40 index closed down 0.1% at 3,840.47, while
Germany's DAX 30 index gained 1% to 7,832.86.
Shares of Munich Reinsurance Company added 1.7% in Frankfurt,
after the firm said it expected first-quarter after-tax profit
close to 1 billion euros ($1.3 billion).
Spain's IBEX 35 index lost 0.3% to 8,365.10, after data showed
unemployment jumped to a new all-time high above 27%.
Outside the major indexes, shares of Royal KPN NV slumped 6.8%.
The Dutch telecom firm said its planned EUR3 billion rights issue
will be two new shares for each existing share.
Logitech International SA sank 7.4%, after the
computer-accessory maker reported a $36 million loss for the fourth
quarter, below expectations of a $4.1 million profit.
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