European stocks gain as investors focus on upbeat corporate earnings

European stock markets were on track for their second day of gains as investors shrugged off a sharp rise in coronavirus cases in India to focus on strong corporate earnings and forecasts of a global economic recovery.

The Stoxx 600 equity index rose 0.4 per cent, having closed 0.7 per cent higher on Wednesday and heading back towards its all-time high achieved earlier this week. The UK’s FTSE 100 added 0.1 per cent.

First-quarter sales at Nestlé grew more quickly than analysts had expected, a day after fellow European blue-chips ASML and Heineken also reported forecast-beating results.

However, in a sign of how the coronavirus crisis is yet to abate, India reported a world record of 315,000 new infections for Wednesday, surpassing the US peak earlier this year.

Brent crude fell 0.6 per cent to $64.93 a barrel, taking its loss for the week so far to 3 per cent. But a strong economic rebound expected in the US and corporate earnings trends meant stock markets maintained a bullish stance.

“There is of course a question mark over what is happening with the pandemic in Asia,” said Stéphane Monier, chief investment officer at private bank Lombard Odier. “But what I think is going to push markets a bit higher is the quality of earnings growth that is coming through this quarter.”

In the US, companies in the S&P 500 are expected to report the strongest quarterly earnings growth since 2018.

Futures markets signalled the S&P 500 would lose 0.1 per cent and the top 100 stocks on the technology-focused Nasdaq Composite would drop 0.2 per cent in early New York trades following a strong session on Wednesday.

Government bonds were steady on Thursday as investors banked on central banks maintaining supportive monetary policy even as growth recovers.

The yield on the 10-year US Treasury, which approached 1.8 per cent a month ago because of fears the brightening US economic outlook would lead the Federal Reserve to reduce its $120bn a month of asset purchases, was little changed at around 1.57 per cent.

The 10-year German Bund yield ticked 0.01 per cent higher to minus 0.25 per cent after European Central Bank meeting that signalled no change to its commitment to buying up vast quantities of bonds issued by nations in the bloc.

Hawkish members of the ECB’s governing council want to scale back the €1.85tn pandemic emergency purchase programme (PEPP) but any action is unlikely until at least June, analysts have said.

The central bank last month pledged to step up the pace of its bond purchases to guard against rising yields pushing up borrowing costs for European companies. Ahead of a press conference later on Thursday, the central bank repeated this view.

“The Governing Council expects purchases under the PEPP over the current quarter to continue to be conducted at a significantly higher pace than during the first months of the year,” the ECB said,

Investors have questioned if the faster pace of purchases meant the PEPP would run out of firepower to support economies that are still struggling with a third wave of coronavirus infections.

“There is about €870bn left [to spend] so if they really step up the pace they are depleting the PEPP envelope more quickly,” said Andreas Billmeier, analyst at global fixed income investment manager Western Asset Management. “This puts them in a tricky spot.”

The euro rose 0.1 per cent against the dollar to $1.205. Sterling fell by 0.4 per cent to $1.389.