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European Stocks Pull Ahead as China Boost Eclipses Weak Earnings

(Bloomberg)

(Bloomberg) -- European equities advanced as China’s moves to boost markets spread optimism amid some lackluster earnings reports.

The Stoxx Europe 600 Index ended the session 0.2% higher. Stocks most exposed to China rose after the country’s central bank moved to support markets just as data showed its economy slowed. Technology was the top-performing sector, bolstered by a rebound in ASML Holding NV.

While some disappointing results pulled down shares in individual companies earlier, they gradually recovered during the session. These included Swedish truckmaker Volvo AB, whose earnings declined in the third quarter amid waning demand, and luxury eyeware manufacturer EssilorLuxottica, whose sales took a hit from a slowing Chinese market. 

European stocks have steadied in October as investors process a rocky start to the third-quarter earnings season. Some high-profile firms have undershot expectations, notably LVMH, whose sales missed, and ASML, which reported underwhelming orders, stoking worries over demand for products from the key Chinese market, in particular.

While companies missing estimates have been severely punished in Europe, Barclays Plc strategists led by Emmanuel Cau noted that the mixed start to the earnings season isn’t bad enough to derail the global rally in stocks.

Stocks did get a small boost on Thursday after the European Central Bank cut interest rates for the third time this year, but the pace of future easing is uncertain and questions remain over the health of the economy. Meanwhile, next month’s US Presidential election is a key risk on investors’ radar.

“European equities are still seen as potentially attractive due to their lower valuations compared to US markets,” said Aneeka Gupta, director of macroeconomic research at Wisdomtree. “But short-term volatility remains a challenge as investors await clearer signals on inflation trends and economic stability.” 

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--With assistance from Michael Msika and Rheaa Rao.

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