European Stocks Rise as Stellar Earnings Outweigh Supply Jitters

European equities rose on Monday, as investors weighed robust earnings reports and a brightening economic outlook against the risks of rising inflation, supply disruptions, and higher taxes. The U.K. market was closed for a public holiday.

The Stoxx Europe 600 Index climbed 0.6%, moving closer to historic highs reached last month. Carmakers led advances, despite continuing warnings about production disruptions due to a shortage of chips. Ferrari NV gained 2.6% amid upbeat estimates for its earnings report due Tuesday.

Renewables underperformed after Citigroup Inc. said in a note that Siemens Gamesa Renewable Energy SA’s 2021 guidance was disappointing. Vestas Wind Systems A/S was among the biggest drags on the Stoxx 600 Index, dropping 4.3%.

European Stocks Rise as Stellar Earnings Outweigh Supply Jitters

The Stoxx 600 Index has climbed more than 10% this year, buoyed by expectations of rapid economic recovery, as vaccinations against the coronavirus progress while fiscal and monetary policy across the region remains loose. While much of the positive news is already priced into lofty valuations, European companies are delivering one of the best earnings seasons on record, supporting the gauge.

Hermes International rose, trading near all-time highs, as investors continue betting on luxury winners in a sector that’s powering ahead in spite of Covid-19. Insurance also rose, with Allianz SE gaining 1.6%.

A gauge of manufacturing activity in the euro area rose to 62.9 in April, the highest reading in the survey’s 24-year history. The violent rebound has caused supply shortages and a surge in prices, with companies surveyed reporting unprecedented delays in securing raw materials and higher costs for chemicals, metals and plastics.

“The ‘laissez-faire attitude of central bankers will not prevent long rates from rising,” Oddo strategist Sylvain Goyon wrote in a note on Monday. “This situation, current and past, is favorable to a reduction in the dispersion of expectations and therefore of a return of the preference for value.”

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