European stocks notched small gains Thursday, showing signs of recovery from their deepest loss in weeks, as a fresh batch of earnings reports rolled in.
Among those results, Deutsche Bank AG posted a steep slide in profit and signaled it will make radical changes to its underperforming investment bank.
Stocks were little changed after the European Central Bank did as expected and held benchmark interest rates steady. Focus will now swing to ECB President Mario Draghi who may offer his thoughts on eurozone-economic growth.
How markets are moving
The euro EURUSD, -0.0329% was buying $1.2175, slightly higher than $1.2161 late Wednesday in New York.
Following a flat open, the Stoxx Europe 600 index SXXP, +0.37% rose 0.5% to 381.88. The utility and telecom groups were the best performing, while the tech and basic materials sectors fell. The pan-European benchmark on Wednesday fell 0.8%, the biggest loss since March 23, according to FactSet data.
Germany’s DAX 30 index DAX, -0.14% was up 0.1% at 12,437.06 in a choppy session for German blue-chips. France’s CAC 40 index PX1, +0.38% gained 0.5% to 5,440.38.
Spain’s IBEX 35 IBEX, +0.07% picked up 0.5% to 9,904.80, and the U.K.’s FTSE 100 UKX, +0.11% , also in a choppy session, was up 0.1% at 7,382.20 after breaking a six-session winning streak on Wednesday.
The yield on Germany’s 10-year bund TMBMKDE-10Y, -5.98% fell 2 basis points to 0.62%, according to Tradeweb data, as prices rose.
Check out: Why the premium for German bonds over Treasurys is the widest in 30 years
What’s driving the market
Stocks held largely to higher ground after the European Central Bank left interest rates unchanged, as expected, and reiterated that it plans to continue its program of buying €30 billion ($36.6 billion) of assets a month until September, “or beyond, if necessary.”
The central bank also repeated that it expects key interest rates to remain at present levels “for an extended period of time” and “well past” the planned end of its asset-buying program. Draghi will hold a news conference at 1:30 p.m. London time, or 8:30 a.m. Eastern.
See: 4 outcomes for the ECB meeting, in 1 handy chart
And read: Expect a careful, dovish Mario Draghi
The ECB in March surprised markets by signaling it’s on track to end its stimulus program before year’s end. But since then, economic data have pointed to a slowdown of the eurozone’s economic expansion, which weighed on investors’ expectations for the start of rate hikes in the middle of 2019.
Making matters worse, core inflation at 1% is still well below the ECB’s target of near, but just below, 2%.
Before the ECB’s policy statement, investors have been sifting through a stream of earnings reports, from big names such as Deutsche Bank, Barclays PLC and Royal Dutch Shell PLC, with a mixed bag of results. In the backdrop were U.S. Treasury 10-year bond yields TMUBMUSD10Y, -1.36% , which were holding above the psychologically important 3% level. Rising bond yields can weigh on stocks as bonds start to offer better returns than equities and raise borrowing costs.
Stocks in focus
Deutsche Bank shares DBK, -2.57% DB, -2.23% lost 2.1% after the embattled lender said first-quarter net profit tumbled 79% to €120 million, and said it will shrink its U.S. investment bank. The report is the first since it ousted Chief Executive John Cryan.
Philips Lighting NV shares LIGHT, -11.81% tumbled 13% as the company said first-quarter net profit fell 67% while sales fell on the poor performance of its home division.
Volkswagen AG VOW3, +3.15% VLKAY, +2.98% picked up 2.1%, with the German auto maker confirming its fiscal-year guidance. First-quarter revenue rose 3.6% and after-tax profit fell slightly to €3.3 billion ($4 billion).
Royal Dutch Shell PLC RDSB, -1.93% RDS.B, -1.77% was down 2.2% even as the oil producer reported its highest quarterly profit since 2013. First-quarter profit on a current cost-of-supplies basis — a number similar to the net income that U.S. oil companies report — rose 69% to $5.7 billion.
Barclays PLC BARC, -1.83% BCS, -1.33% shares were off 0.6% during a seesaw session. The U.K.-based lender said a settlement of charges with the U.S. Justice Department helped drag to a first-quarter loss of £764 million.
What strategists are saying
“We know that the ECB is not ready to raise interest rates and they certainly don’t want to see the euro-dollar pair back above $1.24 because that would offset the improvements in prices. Yet they also want to end QE purchases this year — so Mario Draghi has quite the balancing act to do on Thursday,” said Kathy Lien, managing director of FX strategy at BK Asset Management, in a late Wednesday note.
“We think Draghi will remain cautious and emphasize patience, which in an environment of a rising U.S. dollar could send the euro-dollar pair down to $1.21 and eventually $1.20. However, if the tone of his press conference is a bit more optimistic, the euro could bounce back up to $1.23,” Lien said.
Economic data
Market-research group GfK’s forward-looking consumer confidence index is set to drop to 10.8 points in May from 10.9 points in April, it said Thursday, as geopolitical issues and growing protectionism are souring German consumers’ mood.