European stocks close higher on strong earnings; Johnson wins UK leadership race

Key Points
  • European shares get a boost from strong quarterly numbers from the likes of UBS and AMS.
  • The pan-European Stoxx 600 closes 1% higher, with most sectors and bourses in positive territory.
  • Investors are also awaiting this week's European Central Bank policy meeting.

European stocks closed higher Tuesday as investors digested a strong set of corporate results and looked ahead to this week's European Central Bank policy meeting.

The pan-European Stoxx 600 closed provisionally up by 1%, with the majority of sectors and major bourses in positive territory.

In earnings news, Swiss banking giant UBS beat forecasts with a net profit of $1.4 billion for the second quarter of 2019, marking its best second-quarter performance in nine years. UBS CEO Sergio Ermotti told CNBC's Joumanna Bercetche the results showed "diversification paid off again." Shares of the firm were 2.6% higher.

Elsewhere in the banking sector, Santander posted a slight earnings beat, but net profit still declined 18% due to restructuring costs. The Spanish lender's stock rose 3.6%, while the broader European banking index was up nearly 2%.

Autos stocks however were the best performers, rallying almost 4%, buoyed by a sharp rise in Faurecia's share price. The French auto parts maker climbed more than 11% after it maintained first-half profitability despite a China-led decline in auto production. Fellow parts makers Hella and Valeo also jumped sharply.

Chipmaker stocks also saw a windfall on Tuesday, led by Apple supplier AMS, which saw its stock rise 8% after it beat revenues and issued optimistic guidance for the third quarter of 2019. Another tech company, Logitech, climbed nearly 5% on the back of better-than-expected first quarter earnings.

On Wall Street, stocks got a boost from solid quarterly numbers from companies like Coca-Cola and United Technologies. The Dow Jones Industrial Average advanced 50 points, while the S&P 500 and Nasdaq indexes were also positive.

Investors await ECB meeting

Also in focus for investors is monetary policy. Global stocks have appeared to receive support in recent sessions from expectations that both the ECB and the U.S. Federal Reserve could soon cut interest rates.

The ECB is seen cutting rates by 10 basis points on Thursday, with the U.S. central bank expected to lower rates by 25 basis points at the end of the month.

At the ECB forum in Sintra last month, President Mario Draghi gave a defiantly dovish tone, stating the bank would announce further stimulus if the economic situation deteriorates in the coming months.

Draghi is due to step down as head of the central bank later this year, with International Monetary Fund Managing Director Christine Lagarde set to take his place.

Johnson wins UK leadership race

The big political news for investors Tuesday, was Boris Johnson's victory in the race to become the next U.K. prime minister. Johnson was elected to lead the Conservative Party by its 160,000 members ahead of rival Jeremy Hunt, and will become U.K. prime minister on Wednesday.

Sterling fell versus the U.S. dollar following Johnson's election, last changing hands at 1.2439.

Some market participants are concerned Johnson could pull the U.K. out of the bloc on October 31 without a trade deal in place in order to appease hard-line anti-EU members of the party.

Johnson has insisted the U.K. must leave the EU by the October 31 deadline "come what may," while Hunt has said he would be prepared to further delay the withdrawal process, if required, to secure a new divorce deal.