EUROPE MARKETS: European Stocks Inch Higher, But Gains Kept In Check By 43% Capita Plunge

Stoxx 600 on track for 1.9% January gain

European stocks logged small gains on Wednesday, with the benchmark index staying on track for its best month since September as traders welcomed a round of solid corporate earnings.

U.K. stocks, however, underperformed the wider market after a more than 40% plunge in shares of outsourcer Capita PLC was rattling investors.

What are markets doing?

The Stoxx Europe 600 index rose 0.1% to 396.61, slightly rebounding after a 0.9% slide from Tuesday. For the month, the pan-European benchmark is set for a 1.9% gain, which would be its biggest monthly gain since September.

Germany's DAX 30 index rose 0.3% to 13,343.79, while France's CAC 40 added 0.1% to 5,481.64. The U.K.'s FTSE 100 index was marginally lower at 7,587.53 (http://www.marketwatch.com/story/uk-stocks-head-for-january-loss-as-capita-plunge-rattles-nerves-2018-01-31), heading for a 1.3% monthly loss.

The euro rose to $1.2451 from $1.2404 late Tuesday in New York. The shared currency is on track for its biggest monthly rally since July, up 3.7% in January so far.

The pound slipped to $1.4137 from $1.4149 late Tuesday in New York.

What is driving the markets?

Traders were hesitant to make any big bets on Wednesday, still reeling from this week's global selloff for equities that was sparked in part by a rise in bond yields. However, with a string of upbeat corporate results including from Europe's largest home appliance maker Electrolux and truck maker Volvo, European stocks managed to swing into slightly positive territory on Wednesday.

Markets largely shrugged off what analysts called an uneventful State of the Union speech by U.S. President Donald Trump late Tuesday, in which he praised the strength of the economy and called for deals on infrastructure and immigration.

Investors were also unfazed by data out on Wednesday showing a drop in eurozone inflation to 1.3% in January from 1.4% in December. The fall was widely expected.

After the European markets close on Wednesday, the U.S. Federal Reserve will announce its latest rate decision, although no changes to policy are expected this time. The meeting marks the last one for Fed Chairwoman Janet Yellen, who is handing over the baton to Jerome Powell.

What's new in economics?

Aside from the inflation data, Eurostat also released numbers on eurozone unemployment, showing the joblessness rate remained at 8.7% in December, in line with forecasts.

Separately, data from Germany showed the country's job boom continued in January as jobless claims fell by a more-than-expected 25,000 (http://www.marketwatch.com/story/german-jobless-claims-fall-more-than-seen-again-2018-01-31).

What are strategist saying?

"European markets have found themselves caught up in the nervous sentiment of the last couple of days, with senior ECB officials suggesting that there is now little further justification for the current bond-buying program much beyond September this year," said Michael Hewson, chief market analyst at CMC Markets UK, in a note.

Which stocks are in focus?

Shares of Capita PLC (CPI.LN) tanked 43% after the outsourcing company said it'll suspend its final dividend (http://www.marketwatch.com/story/capita-suspends-final-dividend-plans-share-issue-2018-01-31-3485857) and plans to issue shares as part of a restructuring plan. The announcement comes after rival contractor Carillion PLC (CLLN.LN) earlier in January collapsed after failing to reach an agreement (http://www.marketwatch.com/story/carillion-collapses-after-rescue-talks-with-creditors-uk-government-fail-2018-01-15) with lenders to restructure its debt.

Shares of Electrolux AB (ELUXY) jumped 8.2% after the Swedish home appliance company reported fourth-quarter earnings that beat forecasts.

Volvo AB (VOLV-B.SK) gained 3.1% after reporting record-setting sales in 2017 (http://www.marketwatch.com/story/volvo-revenue-up-11-sales-hit-new-high-in-2017-2018-01-31) after an 11% rise in fourth-quarter revenue.

Ericsson AB (ERIC) slid 9% after the Swedish telecoms equipment maker announced a bigger-than-expected loss in the fourth quarter (http://www.marketwatch.com/story/ericsson-loss-widens-but-maintains-dividend-2018-01-31).

Also in Sweden, shares of H&M Hennes & Mauritz AB (HM-B.SK) slumped 6.3%. The fashion retailer reported a 32% drop in fourth-quarter profit (http://www.marketwatch.com/story/hm-profit-down-32-on-price-cuts-lower-footfall-2018-01-31).

Julius Baer Gruppe AG (BAER.EB) fell 2.5% even after the Swiss bank reported 2017 earnings ahead of forecasts and lifted its dividend (http://www.marketwatch.com/story/julius-baer-to-lift-dividend-after-profit-rise-2018-01-31).

(END) Dow Jones Newswires

January 31, 2018 05:57 ET (10:57 GMT)