Tech, earnings lift European stocks as Biden inches closer to victory

By Sruthi Shankar

(Reuters) – European shares hit a two-week high on Thursday, supported by a handful of strong earnings reports, more stimulus for Britain’s economy and a surge in Wall Street stock futures, as Democrat Joe Biden moved closer to victory in the U.S. presidential race.

In its fifth day of gains, the pan-European STOXX 600 index <.STOXX> rose 0.6% to hit its highest level since Oct. 20, with technology stocks <.SX8P> once again leading the way.

Dialog Semiconductor jumped 7.2% after it reported third-quarter revenue at the higher end of its previously forecast range.

French lender Societe Generale gained 2.8% after it swung back to a quarterly profit as its equity trading business continued to recover from a weak start to the year.

Meanwhile, U.S. futures jumped over 1%, as Biden held narrow leads in Nevada and Arizona, while Republican President Donald Trump was watching his slim advantage fade in must-win states Pennsylvania and Georgia as mail-in and absentee votes were being counted.

Tech stocks looked set to outperform, as the likelihood of a gridlock in U.S. Congress made investors optimistic that tighter regulation and higher corporate taxes on American firms might be hard to enact. [MKTS/GLOB]

Chris Bailey, European strategist at Raymond James in London, said it was a combination of the election and COVID-19 trade coming together.

“The election trade is that there isn’t a ‘blue sweep’. Those conditions where you would’ve perhaps favoured reflation – rising bond yields which would’ve supported value stocks – switched away a bit,” Bailey said.

“We’re now back to favouring COVID-19 trade, which is obviously beneficiaries of work-from-home and lower bond yields.”

Defensive utilities <.SX6P> rose 1.4%, but banks <.SX7P> fell 1.0%, coming under pressure after Dutch bank ING Groep NV fell 7.1% on reporting lower-than-expected pre-tax profit.

Germany’s Commerzbank dropped 6.5% after it reported quarterly loss, as the lender undergoes a restructuring and deals with fallout from the coronavirus crisis.

Munich-based broadcaster ProSiebenSat.1 Media jumped 10.3% after it reinstated its outlook for the full year and returned to profit in the third quarter.

UK’s FTSE <.FTSE> was flat, with sterling on the rise after the Bank of England increased its already huge bond-buying stimulus by a bigger-than-expected 150 billion pounds ($195 billion). [.L]

(Reporting by Sruthi Shankar in Bengaluru; editing by Uttaresh.V and Anil D’Silva)