European shares rose in early trading on Thursday, shrugging off a dip on Wall Street and extending their sharp gains made in the previous session, helped by forecast-beating results from K+S and Boskalis.
At 0900 GMT, the FTSEurofirst 300 index of top European shares was up 0.3 per cent at 1,578.90 points, after surging 1.5 per cent on Wednesday. The index hit a fresh seven-year high earlier in the session.
Shares in German potash and salt miner K+S gained 4.5 per cent and Dutch marine engineering company Boskalis added 3.1 per cent, while French telecoms group Iliad, which pledged to raise operating profit by 10 per cent, rose 1.9 per cent.
As Europe’s earnings season draws to an end, companies have reported a 15.9 per cent rise in quarterly profits — the biggest rise in European earnings since mid-2011 and well ahead of a 6.8 per cent rise in US quarterly profits — according to Thomson Reuters StarMine data, as European firms start to reap the benefits from a lower euro currency.
The euro has fallen by about 25 per cent against the dollar over the past year, giving a major boost to European companies as roughly 50 per cent of euro zone earnings are coming from outside the region.
Analysts have said a drop of 10 per cent in the euro versus a basket of currencies is set to translate into a 6 to 8 per cent rise in European profits. With the euro down 16 per cent against the other currencies in the past year, profits are poised to get a 10-13 per cent boost from the lower euro.
The single currency has extended its losses after the European Central Bank started its quantitative easing campaign earlier this week, highlighting the monetary policy divergence between the euro zone and the United States.
“QE is just starting in Europe, but the impact is already here with the sharp drop in the euro,’’ Saxo Bank trader Andrea Tueni said.
“This is a major boost to European earnings, while the stronger dollar is starting to have a negative impact on US corporate results. Given the divergence between the ECB and the Fed, this trend will probably last for a while and it will continue to fuel big investment inflows into European equities.’’
Around Europe, UK’s FTSE 100 index was up 0.8 per cent, helped by a rebound in energy shares rising along with oil prices, while Germany’s DAX index was down 0.1 per cent after hitting a record high, and France’s CAC 40 was up 0.1 per cent.