China relief lifts European shares as results disappoint

Tue Jan 21, 2014 3:58am EST

* FTSEurofirst 300 up 0.3 pct, Euro STOXX 50 up 0.4 pct

* Market relieved as China intervenes to ease credit squeeze

* Gloomy corporate updates temper optimism

* Unilever bucks trend with earnings beat

By Francesco Canepa

LONDON, Jan 21 (Reuters) - European shares edged higher early on Tuesday as relief at moves to defuse a cash squeeze in China was tempered by a batch of disappointing corporate updates.

The People's Bank of China dumped more than 255 billion yuan ($42 billion) into the financial system, easing concerns about a credit crunch that could hamper growth in the world's No.2 economy.

"People don't want to see instability in China," Grant Lewis, head of research at Daiwa Capital Markets, said.

"If (Chinese authorities) want to move forward in terms of liberalisations you are going to have this kind of volatility in money rates but they do seem to be doing what they can to tackle it."

The FTSEurofirst 300 index of Europe's largest shares was up 0.3 percent at 1,347.53 at 0840 GMT, while the euro zone's blue-chip Euro STOXX 50 was up 0.4 percent at 3,165.64 points.

Waning economic momentum in China, which is revamping its growth model by embracing greater transparency and higher-quality development, has been hitting corporate earnings in Europe.

Shares in Remy Cointreau fell 2.3 percent on Tuesday as the French spirits group said sales contracted more than feared in the third quarter as a Chinese government crackdown on corruption caused once free-wheeling spenders to drink less premium cognac.

It was among to fallers on the STOXX Europe 600 index, which was up 0.3 percent.

The beverage sector was also weighed down by a 2.2 percent fall in SABMiller, the world's No. 2 brewer, with traders saying a 4 percent increase in quarterly net producer revenue was weaker than they expected.

Adding to the gloomy earnings picture for the broader market, Dutch food and chemicals group DSM fell short of its full-year earnings target and French engineering firm Alstom lowered its annual objectives, sending the stocks down 7.8 percent and 12 percent, respectively.

"The market has been rising on hopes that a pick-up in global growth would translate into corporate earnings. Evidently, we're not there yet," a Paris-based trader said.

Bucking the trend, consumer goods maker Unilever reported better-than-expected 2013 results on Tuesday, with an improved performance in emerging markets. Its stock rose 4 percent.

Companies in the STOXX Europe 600 are seen missing consensus expectations by 1.3 percent in the latest quarter, according to StarMine's SmartEstimates, which focus on the up-to-date predictions form historically most accurate analysts.

Today's European research round-up

Europe indexes in 2014:

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