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European equity indexes rebounded in choppy trade on Wednesday as strong euro zone services data and corporate results offset a sell-off in the region’s government bonds and a rise in the euro.
Shares erased early losses after surveys showed euro zone businesses started the second quarter with healthy growth as a buoyant order book again encouraged them to hire more.
Danish wind turbine maker Vestas Wind, mobile phone operator Telenor and AB InBev, the world’s largest brewer, rose between 3 per cent and 5 per cent to be among the top regional gainers after posting better-than-expected results.
The pan-European FTSEurofirst 300 index was up 0.4 per cent at 1,561.05 points at 0810 GMT after falling in five of the previous six sessions. The index is down 5.5 per cent from a 14-1/2 year high hit in April.
Despite a largely positive earnings season, which has seen 63 per cent of STOXX Europe 600 companies that have reported so far meet or beat consensus expectations, European shares have given back some of the hefty gains accumulated since the start of the year.
They have been hit by a continued strengthening of the euro against the dollar amid mixed US economic data and a sell-off in euro zone sovereign debt into May, when the supply of bonds is expected to exceed purchases by the European Central Bank and cash-strapped Greece faces some key repayment deadlines.
The FTSEurofirst remains up by 14 per cent since the start of the year, in a surge largely fuelled by the ECB’s asset-purchase programme and better euro zone economic data.
“For me it is just an unwinding of the consensus positions: long European government bonds, long equities, short euro, long dollar,’’ Ankit Gheedia, a derivatives strategist at BNP Paribas, said.
“There is an unwinding of those trades... because of Greece and because people are starting price a higher probability that a US rate hike won’t happen this year.’’
French bank Societe Generale bucked the trend, however, falling 3.1 per cent after its results.
“We believe that a lack of progress on capital ratio and a mixed set of results — with notable weakness from Russia & CIB cost pressure — suggests that the stock lacks a near-term catalyst,’’ Citi analyst Kinner Lakhani said.
The euro zone Euro STOXX 50 index was up 0.9 per cent, while shares in Athens were down 0.3 per cent.
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