European shares followed US and Asian markets higher on Tuesday as investors awaited a long-anticipated US tax reform Bill which looks almost certain to pass this week.
The pan-European STOXX 600 rose 0.2 per cent to a five-week high, maintaining Monday's momentum, although gains were more muted, with euro zone stocks and blue-chips up 0.1 per cent. Britain's FTSE 100 gained 0.3 per cent, boosted by its weighting towards defensive, high dividend-paying stocks which investors favour when they sense uncertainty.
“The tax reform is driving equities. In our view, the risks are limited and the reform will now pass,” said Valentin Bissat, equity strategist at Mirabaud Asset Management.
Leading stock moves was chipmaker
Shares in AMS, another chipmaker, rose 3 per cent, but this wasn't enough to boost the tech sector, which fell back 0.1 per cent. The highly-valued tech sector has weakened in recent weeks as investors shifted into bank stocks.
Shares in Anglo-South African financial services group Old Mutual gained 4.6 per cent after the company said it would sell its Buxton UK wealth business to TA Associates for $800 million as part of a planned break-up. Intrum Justitia shares fell 6.3 per cent after the debt collection firm said its CFO would leave the company.
Germany-listed shares in South African retailer Steinhoff rose 6.2 per cent, building on a bounce from depressed levels the stock fell to as an accounting scandal broke. Budget airline Ryanair gained 4 per cent, bouncing back after six straight sessions of losses caused by investors' concerns over the firm's decision to recognise unions.
Telecoms stocks were strong performers, boosted by a note from Morgan Stanley arguing the industry could fare better in 2018 thanks to successful cost-cutting, stronger mobile revenue growth and lower cash tax rates. Telcos have been among the worst performing sectors this year, down 2.5 per cent from January.
Overall euro zone equities were drawing to the close of a stellar year of gains, shrugging off a strengthening euro to deliver substantial returns.
“If you look at performance in euros, European equities had a very strong year even compared to U.S. companies,” said Mirabaud's Bissat, adding the difference in local currency performance was mainly down to the euro's strength. “More importantly, it came from earnings growth rather than valuation expansion,” he added.