European stocks close higher boosted by positive manufacturing data; earnings in focus

Key Points
  • The pan-European Stoxx 600 index rose 2.2%, with autos stocks leading the gains as all sectors advanced into positive territory.
  • July's final IHS Markit manufacturing PMI reading showed manufacturing activity across the euro zone expanded for the first time since early 2019.
  • Societe Generale, Heineken and HSBC were among those reporting earnings on Monday.

European stocks closed higher Monday at the start of another big week for corporate earnings, boosted by positive manufacturing data out of the euro zone.

The pan-European Stoxx 600 closed up by 2.2% provisionally, with autos jumping 3.8% to lead gains as all sectors advanced into positive territory. It marks a strong start to August after equities in the region closed out their first negative month since March.

Stocks swung higher after July's final IHS Markit manufacturing PMI (purchasing managers' index) reading showed manufacturing activity across the euro zone expanded for the first time since early 2019, as demand recovered following months of coronavirus-induced lockdown measures. The survey came in at 55.3, outstripping expectations and rising from 48.9 in June.

European markets received a mixed handover from Asia Pacific, where Japanese and mainland Chinese stocks bounced after a private survey showed China's manufacturing activity expanding by more than expected in July, while most indexes in the region slid into the red. German stocks, heavily weighted with exporters, received a boost from China' positive manufacturing data, with the country's Dax index climbing 2.7%.

On Wall Street, stocks began the first trading day of a new month higher, thanks to outperformance among tech stocks. The market also got a boost from better-than-expected manufacturing data. The Institute for Supply Management's manufacturing PMI rose to 54.2 in July, topping a Dow Jones estimate of 53.8.

Geopolitical tensions continue to hang over investor sentiment, with U.S. Secretary of State Mike Pompeo saying Sunday that U.S. President Donald Trump is set to announce "in the coming days" new actions related to Chinese software companies viewed by his administration as a national security threat.

Earnings in focus

Societe Generale on Monday posted a surprise net loss of 1.26 billion euros ($1.48 billion) for the second quarter, missing analyst expectations on the back of increased loan loss provisions due to the coronavirus pandemic. The French lender's shares traded slightly lower.

HSBC reported a 65% year-over-year plunge in pretax profits for the first six months of 2020, also missing projections as a result of sharply increased provisions for bad loans. Europe's largest bank by assets saw its shares slide nearly 3%.

Heineken pulled its interim dividend after swinging to a first-half loss, but said business had picked up since the height of worldwide lockdown measures in April. The Dutch brewer's stock dropped 2%.

At the top of the Stoxx 600, Swedish radiation therapy provider Elekta jumped almost 15%, while at the other end of the index, Germany's Siemens Healthineers fell nearly 9% after announcing a $16.4 billion deal to buy U.S.-based cancer care firm Varian.