Slew of upbeat earnings lift European stocks

European shares climbed on Thursday, as investors brushed off simmering US-China tensions and focused on better-than-expected earnings reports from companies such as Unilever, Daimler and Publicis.

The pan-European STOXX 600 index rose 0.7pc, with automakers surging 3.4pc after Germany's Daimler AG forecast a rise in operating profit at its Mercedes-Benz cars and vans division in 2020 as sales rebound.

Unilever was the biggest boost to the STOXX 600 with a 7.8pc jump as its second-quarter sales fell far less than feared. Shares in Nestle SA and Danone SA rose nearly 2pc each.

"It is a welcome relief that things are less bad than feared as pricing is positive and volumes are not a disaster," Mark Taylor, a sales trader at Mirabaud Securities wrote about Unilever's report.

European stocks broke this week's winning run on Wednesday after the United States abruptly told China to close its consulate in Houston amid accusations of spying, escalating tensions between the world's two biggest economies.

"While we continue to watch how the situation evolves, and expect China to announce its official retaliation measures soon, we lean towards a restrained tension escalation," Citi analysts wrote in a note.

The STOXX 600 is on track to end with weekly gains as hopes of a COVID-19 vaccine and optimism around a European Union recovery fund pushed the benchmark index to early March highs.

Publicis Groupe SA, the world's third-biggest advertising company, surged 15.5pc after it beat market expectations for underlying sales in the second quarter.

Chipmaker STMicroelectronics NV gained 3.9pc as it raised its full-year net revenue outlook, but Swiss drugmaker Roche Holding AG fell 1.5pc as second-quarter sales tumbled nearly 10pc.

Companies listed on the STOXX 600 are expected to report a 58.6pc drop in second-quarter earnings, but many investors believe there is a big margin for error, given analysts in many cases had no precise outlook to factor into their estimates.

European information group Relx dropped 3.6pc as its revenue fell 10pc in the first half of 2020, as the coronavirus pandemic forced countries to halt public events and gatherings.

Online trading firm IG Group slid 6.7pc despite reporting a 52pc rise in annual profit.