Europe Stocks Gain Most in Three Months as Traders Eye Earnings

(Bloomberg) -- European equities staged a recovery from last week’s market carnage as most sectors rallied and investors turned their attention to the start of earnings reports.

The Stoxx Europe 600 Index added as much as 1.1 percent, the biggest intraday advance since July 24. Media shares, including Publicis Groupe SA and WPP Plc, climbed after Omnicom Group Inc. reported third-quarter profit that beat average analyst estimates. At the same time, British American Tobacco Plc slumped as much as 1.9 percent after warning that revenue from smoking alternatives will fall short of expectations this year.

European equities are recovering from last week’s sell-off, which dragged the index to December 2016 lows, as surging bond yields pushed investors to rotate away from stocks. The region’s projected earnings growth for this year is equivalent to about a quarter of double-digit U.S. profit estimates -- a discrepancy that has weighed on European stocks.

“We think over the next six-month period equities can still go higher because we expect that earnings growth to start to come through now and that’s what investors will focus on again,” Mark Haefele, global chief investment officer at UBS Wealth Management, said on Bloomberg TV Tuesday.

Analysts have been slashing their 2018 estimates for the region’s profits since August, Citigroup Inc.’s Earnings Revisions Index shows, recently cutting forecasts by the most in more than two years.

Enel SpA rose 3.5 percent after the energy utility was raised to buy at Citigroup. Airbus SE climbed 2.8 percent. Volvo AB tumbled 3.5 percent after saying a component in its emission controls setup is wearing out faster than expected, which could cause trucks to exceed limits.

Investors also continue to watch the U.S.-China trade conflict as well as higher oil prices amid the U.S.-Saudi spat over the disappearance of a regime critic.

©2018 Bloomberg L.P.