European Stocks Higher on Recovery Optimism; Philips Bucks Trend

© Reuters.

By Peter Nurse

AiVIF.com - European stock markets traded higher Wednesday, continuing the Fed Chairman Jerome Powell-inspired global rally amid confidence in an economic rally despite the deluge of Omicron variant Covid cases.

At 4:30 AM ET (0930 GMT), the DAX in Germany traded 0.5% higher, the CAC 40 in France climbed 0.5% and the U.K.’s FTSE 100 rose 0.8%.

Most sectors are traded in positive territory in Europe Wednesday, with basic resources leading the way, as lower-than-expected inflation data out of China boosted hopes for easier monetary policy there, supporting real estate developers and other big buyers of raw materials.

Also helping were comments from Powell at his confirmation hearing for a second term in charge of the U.S. central bank, when he stated that the U.S. economy could handle tighter monetary policy even in the face of the new Covid-19 surge. He, however, did not announce a quicker change in policy from what had already been signalled, to the market's relief.

A new test of sentiment is expected later Wednesday with the release of the U.S. CPI data for December, which is expected to come in hot, climbing to 7% year-on-year.

Back in Europe, J Sainsbury (OTC:JSAIY) stock rose 1.4% after the British supermarket group raised its full-year profit forecast by at least 9% following stronger than expected food sales over Christmas.

Dunelm (LON:DNLM) stock soared 6.9% after the British home furnishing retailer said its full-year profit was expected to be "materially ahead" of market expectations after a record performance in the festive period. 

Pagegroup (LON:PAGE) stock rose 1% after the recruiter lifted its full-year profit forecast for the third time in six months, buoyed by a surge in demand for long-term hiring amid staff shortages.

On the flip side, Philips (AS:PHG) stock fell 10% after the Dutch health technology company said it expected fourth-quarter core profit to drop around 40%, hit by a global shortage of electronic components and the fallout from a massive recall of ventilators.

Volkswagen (DE:VOWG_p) stock fell 1.6% after the German auto giant said its car deliveries dropped 8.1% in 2021 to just under 4.9 million amid severe supply chain bottlenecks. 

Still, despite the stock market optimism, the surge in Omicron cases in the region shows few signs of letting up. Germany reported a new daily record for Covid-19 cases on Tuesday, and more than half of people in Europe could contract the new variant in the next two months if infections continue at current rates, the World Health Organisation said.

Oil prices traded higher, continuing the sharp gains of the previous session which pushed benchmark contracts to their highest levels since the highly transmissible Omicron variant emerged in late November.

However, supply data from the American Petroleum Institute suggested caution may be warranted. While crude stocks fell by 1.1 million barrels last week, gasoline stockpiles rose by a hefty 10.9 million barrels suggesting the Omicron outbreak may be having an impact on U.S. drivers.

Investors now await the official crude oil supply data from the U.S. Energy Information Administration due later in the day.

By 4:30 AM ET, U.S. crude futures traded 0.8% higher at $81.87 a barrel, while the Brent contract rose 0.6% to $84.19. Both contracts jumped around 3.5% in the previous session.

Additionally, gold futures fell 0.1% to $1,816.65/oz, while EUR/USD traded just higher at 1.1367.