Europe’s STOXX 600 Rises Amid Strong Earnings; Attention Turns to Fed Decision

By Shashwat Chauhan and Pranav Kashyap

(Reuters) – European shares experienced a positive close on Tuesday, driven by gains from earnings across various sectors. Investors remain focused on the upcoming decision from the Federal Reserve regarding interest rates and its implications for future monetary policy.

The pan-European index ended the day 0.5% higher, with the euro zone banking index advancing 1.2%, making it one of the standout performers among major sectors.

Intesa Sanpaolo saw a significant increase of 3.5% after Italy’s largest bank raised its profit forecast, reporting stronger-than-expected quarterly earnings and indicating potential rewards for investors in the future.

Raiffeisen Bank International rose by 3.7% following its beat on profit estimates for the second quarter.

The construction and materials sector climbed 1.3%, buoyed by Spanish builder ACS, which reported more than a 4% increase in first-half net profit.

On the economic front, the euro zone recorded slightly higher-than-expected growth in the second quarter; however, a mixed underlying picture and a series of pessimistic surveys cast uncertainty on the outlook for the coming months.

Simon Wells, chief European economist at HSBC, noted in a report, "With yet another small upside surprise to the GDP data, there is also a case to aim off the surveys a bit. With growth broadly at trend and inflation slowly moving toward target, there is little evidence to suggest that monetary policy is highly restrictive."

Data also revealed an unexpected contraction in the German economy during the second quarter after narrowly avoiding a recession earlier this year, coupled with a rise in inflation in July, which highlights the ongoing challenges facing the euro zone’s largest economy.

Investor attention this week is likely to remain on the Federal Reserve, which will conclude its two-day rate-setting meeting on Wednesday. Market participants are eager to see if the Fed hints at potential interest rate cuts in September.

The Bank of England is also scheduled to announce its latest monetary policy decision later this week.

In other notable stock movements, Novo Nordisk gained 1.4% after the Danish pharmaceutical company released a study indicating that Ozempic reduced tobacco-related health complications for smoking patients with type 2 diabetes.

In the UK, St James’s Place surged 24.8%, making it the top performer on the STOXX 600, after the wealth management firm unveiled a six-year plan to cut costs and overhaul its services.

Poste Italiane advanced 4.3% as the state-owned postal service group slightly raised its full-year profit target following an operating profit that fell less than expected in the second quarter.

Conversely, Diageo experienced a decline of 5.1% as the world’s leading spirits manufacturer cautioned that challenges might persist into the next year after failing to meet full-year profit expectations.