European shares inch lower; services PMI awaited

By Ambar Warrick

(Reuters) – European shares on Wednesday jumped more than 1% after media reports of significant breakthroughs in treating people affected with the new coronavirus, with a slate of upbeat earnings reports also lifting the mood.

A Chinese TV report said that a research team at Zhejiang University had found an effective drug for the virus, while researchers in the UK told Sky News they had made a “significant breakthrough” in finding a vaccine.

Reuters has not verified the media reports, but several traders attributed the sharp move in markets to them.

“If there is indeed a breakthrough, it would be taken as good news given that we’ve heard increasing numbers of companies talking about disruptions at business levels and supply levels,” said Russ Mould, investment director at stockbroker AJ Bell.

“Markets have become more worried about the (virus’s) impact on corporate earnings and global growth.”

The pan-European STOXX 600 <.STOXX> index eyed a third straight day of gains as it recovered from a week of heavy selling driven by concerns over the economic impact of the deadly coronavirus.

Gains in construction and material stocks <.SXOP> were led by French motorways and airport operator Vinci SA , which logged a 15% rise in its 2019 profit, sending its shares up 2.3%.

Technology stocks <.SX8P> also rose for a third straight session, with German chipmaker Infineon Technologies AG leading gains after the company posted in-line results and confirmed its full-year outlook. [nL8N2A512F]

Consumer staples stocks <.SXQP> were undercut by a 9% drop in cigarette maker Imperial Brands Plc after it forecast a 10% fall in its first-half profit and cautioned on annual earnings because of a U.S. regulatory ban.

The stock was also the worst performer on the STOXX 600.

Irish paper-packaging maker Smurfit Kappa Group was among the top gainers on the STOXX 600 after it clocked a 7% rise in its 2019 core earnings.

In economic news, the IHS Markit’s composite purchasing managers’ index (PMI) reading for January showed that business activity in the bloc started 2020 on solid footing, suggesting that a rebound was in the cards after a dismal 2019.

With the bulk of European companies yet to report annual results, investors will be watching for comments on whether a recent easing in Sino-U.S. trade tensions and the mild uptick in economic growth will be reflected in the outlook for 2020.

(Reporting by Ambar Warrick in Bengaluru; Editing by Bernard Orr)