Tech lifts European shares as currency weakens; autos climb

MILAN/LONDON: European shares hit a one-month high on Wednesday, supported by currency weakness and a rally in tech stocks following well-received earnings updates and a record close for the Nasdaq.

The tech index rose 2.5 percent with Ericsson  up 8.5 percent after the mobile telecom equipment maker unexpectedly swung to a modest operating profit, while semiconductor bellwether ASML jumped 8.1 percent on forecast-beating results.

Their gains and a positive assessment of the U.S economy from Federal Reserve Chairman Jerome Powell on Tuesday drove the pan-European STOXX 600 benchmark index up for a second day, putting it 0.6 percent higher by the close.

The upbeat remarks from Powell, who will continue his testimony to Congress later on Wednesday, lifted the dollar, which in turn helped shares in Europe's export-oriented sectors and Germany's DAX rise.

"While acknowledged risks and uncertainty stemming from the growing trade tension, he stated that the risks to the outlook were "roughly balanced"," said UniCredit strategists.

Autos stocks, which rely heavily on exports for growth and have been penalised by the United States threatening to introduce higher import tariffs, were among the best performers, up 1.1 percent at a one-month high.

Traders said the sector was also supported by reports that European Commission President Jean-Claude Juncker will visit U.S. President Donald Trump in Washington on July 25 to discuss strained trade ties.

European automakers send around $50 billion worth of cars to the United States and Trump has repeatedly threatened to raise tariffs on car imports from Europe.

Shares in BMW, the most exposed carmaker with up to one-fifth of its global sales heading to the United States, rose 1 percent, while Volkswagen climbed 2.2 percent.

Europe's banks underperformed, dragged down by a drop of 9.1 percent in Danske Bank shares after the Danish lender said 2018 net profit would be at the low end of its target range.

Denmark's biggest lender also said it would forego profits made from transactions in Estonia subject to a money laundering investigation.

Another top large-cap gainer was Novartis, which rose 3.2 percent following its earnings update. The Swiss heavyweight drugmaker said it was on track for sales and profit growth this year after posting strong second quarter results.

Earnings beats drove Swedish mobile operator Tele2  and Rare disease drug maker Sobi up more than 13 percent each.

Orion's strong second-quarter earnings boosted its shares up 9.2 percent.

Britain's exporter-heavy FTSE 100 rose 0.7 percent as sterling was further weakened by worries about Prime Minister Theresa May's ability to push through her Brexit plans.