European stocks hit record highs

Strong earnings updates from oil major BP, banks and others drove European stocks to record highs on Tuesday even as concerns lingered over rising Delta variant cases and China’s regulatory moves.

After a hesitant start, the region-wide STOXX 600 index rose 0.2 per cent to hit an all-time high in morning trade.

Oil & gas stocks were the top gainers as BP rose 2.9 per cent after it lifted its dividend and ramped up share buybacks on the back of a surge in quarterly profit to $2.8 billion.

French lender Societe Generale jumped 5.5 per cent after it lifted its profit forecast for the full year, while UK-listed Standard Chartered gained 1.0 per cent after it reported a higher-than-expected first-half profit.

Second-quarter earnings have been strong, with 66 per cent of the more than half of the STOXX 600 companies that have reported so far topping analysts’ profit expectations, according to Refinitiv IBES data.

Despite concerns about rising COVID-19 cases globally and higher inflation, European stocks are trading at record levels as investors rotate into the economy-linked cyclical sectors such as financial and industrials with a nascent recovery continuing.

“Momentum stocks currently trade at an exceptionally large discount to both growth stocks and the European broad market,” analysts at BCA Research wrote in a note.

They recommend investors “move more aggressively” into industrial equities, which are poised to benefit from the rise in global capex and the excess money supply growth.

However, Asian stocks were mostly lower as the Delta variant spread in key markets and Chinese officials took aim at video game producers once again.

Dutch firm Prosus, which has a stake in Chinese tech giant Tencent, fell 5.3 per cent, while other online video gaming companies like Evolution, Ubisoft and Embracer were down between 1.6 per cent and 3 per cent.

The tech sector was among the biggest drags after German chipmaker Infineon Technologies fell 1.5 per cent as it said it was battling extreme tightness in its markets. BMW slid 3.8 per cent even after raising its profit forecast for 2021 as it said the global chip shortage and rising raw materials prices would hurt its performance in the second half of the year.