Investors piled back into European stocks on Wednesday, boosting indexes higher in a relief rally a day after geopolitical concerns caused a sharp dip across equity markets.
The pan-European STOXX 600 gained 0.5 per cent, recovering nearly all the ground lost in the previous session when North Korea's missile launch sparked a sell-off. Euro zone stocks and blue-chips rose in line.
Banking stocks, which had led the risk-averse move lower on Tuesday, were the strongest performers, up 0.9 per cent, helping Italy's bank-heavy index outperform.
Fears of a more drawn-out correction dissipated, with Credit Suisse strategists saying: “Market jitters such as these are unlikely to turn into a longer-term period of outright risk-off sentiment.”
Investors' focus turned back to encouraging earnings news on Wednesday, driving gains across all sectors.
Shares in French medical equipment supplier Biomerieux led the gains, jumping 7.8 per cent after it raised its 2017 forecasts, bolstered by a strong first half. Its shares have risen more than 30 per cent year-to-date, outperforming the healthcare sector's modest 1 percent gains.
Shares in German broadcaster RTL pared early gains, up 2 per cent after it boosted second-quarter revenue, beating expectations despite an advertising market it called challenging.
RTL helped the media sector gain 0.6 per cent, recovering from its nine-month low hit in the previous session after broadcaster Prosiebensat cut its outlook for advertising revenues.
Stronger first-half profit and growing business volume helped Swiss insurer Baloise gain 5.2 per cent.
“The additional solvency disclosure confirmed the company is strongly capitalised; as such Baloise remains an excellent name for yield-seeking investors,” said Baader Helvea analysts, adding however that the stock is not a bargain on valuation.
Broker upgrades also spurred some moves higher.
Finnish elevator company Kone jumped 3.2 per cent after Morgan Stanley analysts switched their preference to it over peer Schindler, saying Kone could benefit more from a pick-up in elevator orders in China where it has a leading market position.
Citi analysts' “buy” rating on British online grocer Ocado sent its shares up 2.2 per cent.
The US bank's analysts said automation - which Ocado has developed in its warehouses - would become increasingly prevalent, and online grocery shopping would grow.
One weak spot was Swedish property developer JM whose shares sank 4.1 per cent after Norwegian building association OBOS said it sold all its shares in the firm.
Though European stocks have seen some sharp moves in recent weeks, punctuating an unusually calm year, sell-offs have tended to fizzle out as shares are supported by global investors continued confidence in the regions economic growth and relatively cheap valuations compared to the US market.
Earnings growth also remained encouraging. With the majority of company reports through, Thomson Reuters data estimated earnings for the STOXX 600 would increase 16 per cent year-on-year for the second quarter.