European shares rise for fourth consecutive week
European shares rose for the fourth consecutive week on Friday as confidence over the region’s economic recovery outweighed worries over the Catalonia crisis, whose impact remained confined to Spanish equities.
While Spain’s IBEX ended a tumultuous week down 1.9 percent after a banned referendum last weekend in the wealthy Spanish region overwhelmingly backed independence, the pan-European STOXX 600 index posted a five-day gain of 0.3 percent.
Redemptions in Spanish stock funds hit their highest level in nearly three years over the past week as investors became alarmed by the confrontation between Madrid and Catalonia, EPFR Global data showed.
But flows into European equity funds exceeded $1 billion for the third week running as the region’s economic recovery retained its momentum.
Credit Suisse International Wealth Management Chief Investment Officer Michael O‘Sullivan said he did not expect to change investment strategy because of events in Spain.
A weakening euro has supported the exporterheavy German index, as well as the broader euro zone STOXX index, which enjoyed its sixth straight week of gains, holding near five-month highs.
The UK’s FTSE rose 0.2 percent after Prime Minister Theresa May said she would stay on as leader to provide stability as Britain enters a crucial stage in Brexit talks.
The S&P 500 Index has climbed 3.6 percent in a month, the best pre-earnings season in five years. If stocks anticipate profits, investors clearly expect something big when companies start reporting results next week. However, Wall Street analysts, have cut their estimates for S&P 500 income growth by more than half. At 3.6 percent, they’re now predicting the biggest slowdown since 2011 after profits expanded about 11 percent in the March-June quarter.
While analysts always lower their expectations heading into earnings season, the 4.9 percentagepoint reduction is almost double the average cut in the past year. All 11 industries suffered downward revisions, with financials and consumer discretionary seeing growth estimates going from positive to negative.