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Rebound in hard-hit tech firms lifts European stocks

© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, January 10, 2022. REUTERS/Staff

By Anisha Sircar

(Reuters) – European shares leaped on Tuesday as investors returned to tech stocks after a seven-day rout in the sector fuelled by concerns about rising rates, while a batch of upbeat earnings also aided the mood.

The pan-European advanced 1.1% following a late-session recovery on Wall Street that supported Asian equities. [.N]

The European tech index advanced 2.4%, with almost every stock trading in positive territory, after tumbling 3.6% to a near three-month low in the previous session.

“The intraday rebound from the Nasdaq provides some support in the short term, but investor positioning in the tech sector is still very high, so there’s more underperformance to come,” said Morgan Stanley (NYSE:)’s chief European equity strategist Graham Secker.

European bourses have come well off the record highs they struck earlier this month as rising yields, inflationary pressures and COVID-19 cases pile pressure on equities and investors look for clues on policy tightening.

The European Central Bank (ECB) does not see euro zone inflation above its 2% target in the medium term, chief economist Philip Lane said in an interview.

Morgan Stanley’s Secker said he does not expect the ECB to raise rates over the next 12 months, but a shift in the global narrative towards faster tightening could pressure the central bank and the region’s equities.

“But this will be another good earnings season, which will support the market,” he added.

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Profit for companies listed on the STOXX 600 is expected to jump 49.3% in the fourth quarter to 109.1 billion euros ($123.7 billion) from a year earlier, Refinitiv data showed.

In earnings-related moves on Tuesday, Germany’s Delivery Hero SE jumped 5.6% after saying it expects its food delivery business to break even during the second half of 2022 as demand has soared since the pandemic began.

HelloFresh gained 3.3% after the German meal-kit delivery firm announced a share buyback of up to 250 million euros.

Construction chemicals maker Sika AG climbed 3.4% after reporting a 17.3% rise in 2021 sales, boosted by acquisitions and an upturn in the building industry.

Telecoms equipment maker Nokia (HE:) rose 2.6% after saying it expected to exceed its 2021 earnings view.

Meanwhile, Deutsche Bank (DE:) slipped 1.5% after U.S. financial investor Cerberus, which has favoured a merger of the bank and Commerzbank (DE:), divested a large chunk of its holdings in the top two German lenders.

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