European shares rise as earnings crank up, HSBC gains

Mon Nov 4, 2013 7:02am EST

* FTSEurofirst 300 up 0.3 percent, near 5-year highs

* Expectations of dovish signals from ECB support market

* HSBC up on strong quarterly earnings

* Roche leads healthcare firm up after superbug deal

* Ryanair, Weir fall on profit warnings

By David Brett

LONDON, Nov 4 (Reuters) - Shares in banking heavyweight HSBC gained on Monday on strong results, in a rising market supported at five-year highs by expectations of additional monetary stimulus from the European Central Bank.

Europe's largest bank by market capitalisation climbed 2.3 percent after it reported third quarter earnings rose 10 percent year-on-year, well ahead of market expectations.

Switzerland's UBS and Credit Suisse, each fell almost 3 percent after media reports that Swiss politicians were considering tightening capital requirements for the country's banks.

As the busiest week of a mixed quarterly earnings season got under way, the FTSEurofirst 300 rose 0.3 percent to 1,293.94 by 1107 GMT, hitting the latest in a succession of five-year highs in morning trade.

Despite the mixed picture for financials , the sector added the second most points to the index, while healthcare firms were the top gainers.

Swiss heavyweight Roche rose after striking a $550 million deal for a superbug-fighting antibiotic.

Autos performed strongly after Peugeot PEUP.PA said French car registrations rose in October, with Volkswagen , which has increased its European market share in recent years at the expense of Peugeot, gaining 1.1 percent.

Miners bounced 1 percent after data showed the service sector in China, the world's biggest consumer of raw materials, expanded at its fastest pace in 13 months in October, offering indications that the economy has stabilised.

The sector is down nearly 13 percent in 2013 on concerns over earnings sustainability related to an earlier slowdown in China growth.

EARNINGS MIXED

So far in Europe, 67 percent of companies have missed sales expectations and 53 percent have fallen short on profits, according to Starmine data.

Airlines were the main drag after Europe's biggest carrier, Ryanair, said full-year profits will fall for the first time five years. Its shares fell 11.8 percent in heavy trade with volumes in the stock 6 times their 90-day daily average.

British engineer Weir Group shed 7.7 percent after a profit warning.

On average, more analysts expect European company earnings to decline over coming quarters than to increase, according to Datastream.

But European equity markets have held around multi-year highs, supported by the ultra-loose monetary policies adopted by central banks that have depressed returns in other asset classes.

The ECB is expected to strike an even more dovish tone at its policy meeting on Thursday following a sharp drop in euro zone inflation in October.

UBS and RBS are anticipating an interest rate cut but many others expect the ECB to hold fire on concrete action until at least December.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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