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European shares rose on Tuesday, with Germany’s DAX briefly touching a new peak for 2016, as gains in major mining companies and solid corporate results at leading blue-chip firms buoyed the markets.
The pan-European STOXX 600 index was up by 0.3 per cent, while Germany’s DAX rose 0.6 per cent to touch a new peak for 2016 of 10,827.72 points.
The German stock market pushed higher after data on Tuesday showed that German business morale had improved unexpectedly in October, suggesting company executives have become more optimistic about the growth prospects for Europe’s largest economy.
Sharon Bentley-Hamlyn, director at Aubrey Capital Management, said German companies such as HeidelbergCement could do well in a scenario where governments looked to increase infrastructure projects to buoy the general economy.
“We think politicians generally believe that central banks have come to end of the line on monetary policy and stimulus will now have to be fiscal, which probably means increased government spending, rather than lower taxes,” said Bentley-Hamlyn.
“Infrastructure projects are likely to be a main beneficiary and that is why we are seeing strong share price trends in related companies such as HeidelbergCement and CRH in the cement and aggregates space,” she added.
HeidelbergCement's shares were slightly higher, but the stand-out performers on the STOXX 600 index were UPM and Luxottica.
UPM surged 8 per cent after the paper maker posted higher profits and flagged restructuring plans, while Luxottica climbed 7 per cent after the Italian eyewear maker reported higher revenues and confirmed its 2016 outlook.
Diversified miner Anglo American also rose sharply after the company’s production update, helping lift the European basic resources sector to its highest level since August 2015.
However, shares in semi-conductors group AMS slumped by nearly 20 per cent after it gave a weak Q4 outlook, while some analysts were cautious over AMS' mid-term targets.
“The significantly weaker than expected guidance for Q4 2016, as well as the company’s volatile track record, are not supportive regarding investors' confidence in reaching this ambitious medium term target, in our view,” said analysts at Baader Helvea.
The STOXX 600 index remains down by around 6 per cent since the start of 2016.
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