European shares gain on earnings boost, focus on Powell comments

European shares gain on earnings boost, focus on Powell comments

By Ankika Biswas and Amruta Khandekar

(Reuters) – European shares eked out slim gains on Tuesday, helped by some upbeat earnings reports though investors grew increasingly jittery about interest rates staying higher for longer as they awaited comments from Federal Reserve Chair Jerome Powell.

The pan-European STOXX 600 closed up 0.2%.

The energy index was the top sectoral gainer, rising 3.0%, boosted by an 8% jump in shares of BP after the oil major reported record profit in 2022 and hiked its dividend.

The banks subindex rose 1.2% as BNP Paribas gained 2.6% after raising its 2025 targets and posting upbeat revenue growth.

Losses in industrial shares and in consumer staples firms such as Nestle and Unilever limited the upside for the STOXX 600.

Comments from Fed Chair Powells expected at 1740 GMT (1240 p.m. ET) will follow a blowout U.S. jobs report last week, which has led policymakers such as Atlanta Fed President Raphael Bostic and Minneapolis Fed President Neel Kashkari to stress the need to keep interest rates higher for longer.

Such comments have dealt a blow to hopes that the global rate hiking cycle was close to an end which were driven by largely dovish commentary from the Fed and other central banks last week.

“A lot of investors are growing more cautious because there‘s this belief that inflationary pressures are not going to continue to fall as quickly as they have been, and that’s going to likely lead to more tightening by the Fed,” said Edward Moya, senior market analyst at OANDA.

“And if the Fed tightens more than that will probably give way for the other major central banks to do a little bit more as well.”

Investors are also awaiting remarks from European Central Bank (ECB) policymakers Peter Kazimir and Klaas Knot due later in the day.

A survey by the ECB on Tuesday showed euro zone inflation expectations edged up again in December.

Other earnings reports from the region were mixed.

Danish medical device maker Ambu jumped 12.5% to top the STOXX 600 after its quarterly sales beat expectations.

Nordic Semiconductor ASA slumped 18.8% to the bottom of the STOXX 600 on a quarterly profit miss, followed by sensor maker ams-OSRAM, which dropped 17.3% on a weak first-quarter outlook.

Siemens Energy fell 2.3% on plans to raise capital to help fund the planned takeover of its troubled wind division.

On the economic data front, German industrial production fell more than expected in December.

(Reporting by Ankika Biswas and Amruta Khandekar in Bengaluru; Editing by Saumyadeb Chakrabarty, Sriraj Kalluvila and Jonathan Oatis)