Thursday, August 22 17:23:06
European stocks received a boost today as economic data from the euro zone indicated a recovery was taking hold, potentially providing an uplift to earnings into the year-end.
By 1422 GMT, European shares were enjoying their best session since early July, rebounding 13.65 points, or 1.1 percent to 1,221.36, following falls over the last three days.
The Stoxx 600 also rose 1.1 percent, to 304.04, and all sectors were in positive territory after data showed business activity across the euro zone picked up more quickly than expected in August.
"The burning question now is how long is the lag between improving macro fundamentals and an EPS upgrade cycle?" Robert Quinn, chief European equity strategist at S&P Capital IQ, said.
"Typically it is four months and accelerates when PMIs cross 52 (August was 51.7), and hence we stick to our previous timeline that the Q3 reporting season will see significant upgrades," he said.
S&P has targets of 325 for the Stoxx 600 for the end of 2013, up 7 percent from current levels, and 375 for end-2014. It said the two-year earnings downgrade cycle is over and it assumes 7 percent and 10 percent EPS growth for 2013-14.
China also released better data, pointing to stabilising growth and helping lift London-listed mining shares by 1.9 percent as Chinese manufacturing activity hit a four-month high in August, according to a flash PMI.
"If you want to understand whether there's a positive or a negative outlook for equities, then PMIs are quite a good measure. We've seen a gradual improvement in PMIs since last July, and now we're in growth territory," James Butterfill, global equity strategist at Coutts, said. (Reuters)