European shares at a one-month high, supported by strong earnings results

European stocks surged on Tuesday, reaching their highest level in over a month, buoyed by robust earnings reports from companies like Swiss UBS and Italian UniCredit, alongside optimistic sentiment surrounding potential interest rate cuts.

At 0710 GMT, the European STOXX 600 index climbed 0.6 percent, building on its highest weekly close in a week recorded on Monday.

UBS shares soared 6.3 percent after the bank unveiled a three-fold increase in net profit for the first quarter, marking its first quarterly profit since acquiring competitor Credit Suisse. This propelled the financial services index up by 1.8 percent.

Similarly, UniCredit, the second-largest Italian bank, saw its shares rise by approximately three percent, driven by positive market reaction to its earnings report.

The positive earnings momentum extended beyond the banking sector. German chip maker Infineon also experienced a significant uptick, with shares rising by 6.5 percent. However, the company announced a cost rationalization program following a downward revision of its full-year profit expectations.

Conversely, Danish medical equipment manufacturer Coloplast witnessed a 5.1 percent decline in its shares, likely influenced by market sentiment or specific company-related factors.

Stocks further benefited from a decrease in yields on euro zone bonds, driven by mounting speculation that both the Federal Reserve and the European Central Bank would implement interest rate cuts this year, especially in light of disappointing US jobs data released last Friday.

Investors viewed the prospect of lower interest rates positively, as it could stimulate economic activity and boost corporate earnings. This optimism fueled bullish sentiment across European equities, underpinning the broad-based rally in the market.

The positive earnings results and the anticipation of monetary policy support helped to mitigate concerns about geopolitical tensions and the economic impact of the ongoing Russia-Ukraine conflict.

Overall, the upbeat mood in European markets underscored investors’ confidence in the resilience of corporate earnings and their expectations of supportive monetary policies, driving stocks to their highest level in over a month.