European shares rose on Tuesday
to extend the previous session's rally, with Germany's DAX
index outperforming, driven by what traders saw as an
easing of tension in the Ukraine crisis.
European stock markets had rebounded sharply on Monday after
Russia's Foreign Ministry said some progress had been achieved
during talks between Russia, Germany, France and Ukraine over
Although the situation remained fragile - with Ukraine
government forces reporting new advances against pro-Russian
separatists - traders took consolation from the fact that the
situation had not worsened materially, in their eyes.
"The Ukraine situation is dragging on, which is a bit of a
concern, but on an underlying basis, the stock markets look OK.
People still want to be in the markets rather than out," said
Terry Torrison, managing director at McLaren Securities.
The pan-European FTSEurofirst 300 index, which is
still down by nearly 4 percent since mid-June, rose 0.4 percent
to 1,344.43 points.
The DAX outperformed to rise 1 percent to 9,333.54 points.
The DAX has risen nearly 4 percent in the past 10 days but is
still down by some 7 percent from its record high of 10,050.98
points set in late June.
Torrison said the DAX could rise to 9,500 points by the end
of August, if the Ukraine situation did not worsen.
The German equity market's recent underperformance has
dragged the average price-to-earnings ratio of local shares down
to a level not seen since October 2013, according to data from
Thomson Reuters Datastream.
The MSCI Germany index trades at 12 times
expected earnings while the MSCI Europe trades
at 13.6 times earnings, making Germany's P/E ratio relative to
Europe the cheapest in nearly 10 years. By comparison, Wall
Street's S&P 500 trades at about 15 times expected
Shares in Moller-Maersk surged 4.6 percent
after the Danish shipping and oil group posted
better-than-expected results, raised its full-year profit
outlook and disclosed ed a $1 billion share buyback plan.
Shares in Lindt & Spruengli also rose 1.2 percent
as the Swiss chocolate maker confirmed its full-year targets
after profit rose 14 percent in the first half.
As Europe's earnings season draws to an end, about 52
percent of companies listed on the pan-European STOXX 600 index
companies have met or beaten earnings forecasts,
according to Thomson Reuters StarMine data.
"There's been a strong outperformance of U.S. stocks versus
Europe in the past few weeks, so there's scope for a little
rebound in Europe in the short term. Good earnings from Lindt
and Moller-Maersk today are helping in that direction," said
Arnaud Scarpaci, a fund manager at Montaigne Capital.