European stocks Brief: Strong earnings
European stocks held steady on Thursday. The pan-European STOXX 600 index was lat in morning trade after eight consecutive days of record gains, but gained later in the day, hitting yet another record high, as strong earnings from insurers and M&A activity in the UK helped offset a fall in mining stocks.
Adidas rose on news it’s selling its Reebok brand to Authentic Brands Groups for up to 2.1 billion euros ($2.5 billion).
British food delivery company Deliveroo added another 8.9%, continuing to climb after German rival Delivery Hero’s stake in the company was revealed earlier this week.
Earnings and M&A activity drive European stocks
European benchmark STOXX 600 clocked its longest winning streak since June, as earnings reports and optimism related to the pace of vaccination across Europe reinforced investor confidence in an economic recovery.
Gains in Europe were capped after stocks in Asia-Pacific mostly declined overnight, as the spread of the delta variant continued to trouble investors. Germany’s DAX was higher by 0.06%, while the French CAC 40 lead the FTSE 100 lower. They were both down 0.43% and 0.07% respectively.
Data showed Eurozone factory output fell in June, as Germany, the bloc’s industrial powerhouse, faltered amid supply bottlenecks.
At the top of the Stoxx 600, British food delivery company Deliveroo added another 8.9%, continuing to climb after German rival Delivery Hero’s stake in the company was revealed earlier this week.
In the UK, insurer Aviva rose 1.8% after it said it would return at least 4 billion pounds ($5.5 billion) to shareholders, while Zurich Insurance Group AG added 2.2% on reporting a 60% jump in first-half business operating profit. Dragging down miners, UK-listed shares of global miner Rio Tinto tumbled 6.1% on trading ex-dividend. Meanwhile, Cineworld Group rose 7.2% after it said it was considering a listing of itself or a partial listing of its movie chain Regal on Wall Street.
Stock Spirits Group jumped 42.5% of funds as funds affiliated with private-equity firm CVC agreed to take over the London-listed vodka maker in a deal valuing it at 767 million pounds ($1.1 billion).
Data showed Britain’s economy grew by a faster than expected 1% in June, after many hospitality firms restarted indoor service in mid-May and as more people visited doctors following the pandemic, lifting healthcare.
However, growth remains 2.2% below its pre-pandemic level. A preliminary estimate of second-quarter GDP showed growth of 22.2% from the same period last year when nationwide lockdown measures sent the British economy into freefall.
In Germany, Deutsche Telekom rose 2.8% after raising its profit outlook for the second time this year. Dutch insurer Aegon NV jumped 6.5% on posting much better than expected second-quarter earnings.
Meanwhile, Adidas rose 1.6% after selling its Reebok brand to Authentic Brands Groups for up to 2.1 billion euros ($2.5 billion), as the German sporting goods company sought to draw a line under an ill-fated investment.
Adidas bought Reebok for $3.8 billion in 2006 to help compete with arch-rival Nike, but its sluggish performance prompted repeated calls from investors to sell the U.S. and Canada-focused brand.
In the meantime, Adidas managed to eat into Nike’s dominance in the United States with its brand, helped by a partnership with celebrities like Kanye West, Beyonce, and Pharrell Williams.
Adidas reported last week that Reebok’s first-half sales jumped to 823 million euros from 600 million a year ago, and the brand made a net gain of 68 million euros compared to a net loss of 69 million in the first half of 2020.