Earnings hopes help Europe stocks extend rally

By Blaise Robinson

PARIS (BestGrowthStock) – European stocks rose on Tuesday, up for the sixth straight session and hitting a near three-week high, as forecast-beating results from Alcoa (AA.N: ) fueled hopes for strong company profits this earnings season.

Investors brushed aside Moody’s rating downgrade of Portugal’s debt by two notches to “A1” as it was expected and applauded the smooth Greek treasury bill auction, the country’s first debt sale since a massive emergency loan backstop from the European Union and International Monetary Fund was agreed in May.

At 1126 GMT, the FTSEurofirst 300 (.FTEU3: ) index of top European shares was up 1.7 percent at 1,042.99 points, while the Euro STOXX 50 (.STOXX50E: ), the euro zone’s blue chip index, was up 1.6 percent at 2,728.48 points, flirting with a key resistance level of 2,737.62 — the 50 percent retracement of the index’s fall from its April high to its May low.

“The steep retreat expected by chartists has not materialized, at least not yet,” said IG Markets technical analyst Vincent Ganne in Paris.

“Downtrend signals have abated, disrupted by the start of the earnings season. But there aren’t uptrend signals either, and volumes are ridiculously low, so it’s better not to read too much into this rebound.”

Midway into the session, volume on the FTSEurofirst 300 represented only 33 percent of the index’s 90-day average daily volume.

The FTSEurofirst 300 has jumped about 8 percent since hitting a low on July 1, when investors started to look for bargains as fears over the euro zone debt crisis and banks’ balance sheets started to ease while the focus turned back to corporate results and outlooks.

Kicking off the second-quarter earnings season, U.S. aluminum major Alcoa Inc (AA.N: ) posted a stronger-than-expected second-quarter profit (Read more your timing to make a profit.) on Monday and raised its estimate for global aluminum consumption.

Rivals Norsk Hydro (NHY.OL: ) surged 3.7 percent, ArcelorMittal (ISPA.AS: ) was up 2.3 percent and Anglo American (AAL.L: ) gained 1.8 percent.

FROM MACRO TO MICRO

“It was quite predictable that the market would bounce back on the results (this earnings season). We’re switching from a macro focus to a micro focus, and this should drive the market in July, although it will stay range-bound,” said Claudia Panseri, head of equity strategy at Societe Generale CIB.

Investors are awaited results from bellwethers such as Intel (INTC.O: ), Google (GOOG.O: ), JPMorgan (JPM.N: ), Bank of America (BAC.N: ) and General Electric (GE.N: ), due later this week.

Banking stocks featured among the top gainers after the Greek auction and as recent worries over the sector’s stress tests moved to the back burner.

National Bank of Greece (NBGr.AT: ) was up 4.6 percent, Barclays (BARC.L: ) rose 3.6 percent, Dexia (DEXI.BR: ) gained 2.5 percent and Societe Generale (SOGN.PA: ) added 1.7 percent.

However, Frederic Leroux, head of risk management at Carmignac Gestion, remained concerned about the stress tests, whose results are due later in the month.

“They should give us a few banks’ names that need to quickly improve their solvency ratio. They clearly have to show toughness … otherwise the huge doubts on the European banking system will remain,” Leroux said.

Around Europe, UK’s FTSE 100 index (.FTSE: ) was up 1.7 percent, Germany’s DAX index (.GDAXI: ) up 1.6 percent, and France’s CAC 40 (.FCHI: ) up 1.7 percent.

Shares of oil major BP (BP.L: ) rose 3.8 percent on rising optimism the Gulf of Mexico oil spill could soon be contained, as well as on hopes of asset disposals.

(Additional reporting by Marie Testard and Juliette Rouillon; editing by Karen Foster)

Earnings hopes help Europe stocks extend rally