Europe Markets: European stocks march higher as traders take cue from Wall Street

European stocks advanced on Tuesday, taking the lead from an upbeat session the prior day in the U.S., as attention shifted from geopolitical concerns to the earnings season.

U.K. stocks erased an earlier loss and swung higher, after a mixed reading on the country’s labor market sent the pound lower.

What are markets doing?

The Stoxx Europe 600 index SXXP, +0.44%  rose 0.2% to 378.65, partly recovering from a 0.4% loss on Monday , which came as traders digested a U.S.-led missile attack on Syria over the weekend.

Germany’s DAX 30 index DAX, +0.93%  climbed 0.6% to 12,469.70 on Tuesday, while France’s CAC 40 index PX1, +0.53%  added 0.3% to 5,330.79.

The U.K.’s FTSE 100 index UKX, +0.29%  erased an earlier loss and turned marginally positive at 7,199.84. That reversal came as the pound GBPUSD, -0.1255% fell after U.K. wage data failed to show the solid growth some had hoped for. Sterling bought GBPUSD, -0.1255%  $1.4335, compared with $1.4338 late Monday in New York.

The euro EURUSD, -0.0808%  was trading at $1.2397, compared with $1.2381 late Monday in New York.

What is driving the market?

Stocks in Europe took a cue from the U.S., where equity markets produced sizable gains on Monday and looked set for another upbeat session on Tuesday. Those gains came as traders put worries over Syria-driven U.S.-Russia tensions on the back burner, and focused instead on earnings season. First-quarter financial results are expected to paint an upbeat picture for corporates in the U.S. and Europe.

Meanwhile, in the U.K., the direction for the pound and stocks was driven by labor-market data for February. Wages both with and without bonuses rose 2.8%, meaning that for the first time in almost a year, wages grew slightly more than inflation.

The data were in line with FactSet estimates. But some traders and analysts had hoped for wage growth including bonuses to come in at 3%. Such a reading was seen as strengthening the case for a Bank of England interest rate rise in May.

The disappointment yanked the pound from its intraday high of $1.4377, which was also the highest level since the U.K.’s Brexit referendum in 2016.

What other data are in focus?

The German ZEW economic sentiment index for April slid to minus-8.2, missing forecasts of a minus-1.5 reading and falling from 5.1 in March. The ZEW current conditions index dropped to 87.9, from 90.7 in March, but beat the 86 reading expected in a FactSet survey.

The U.K.’s Office for National Statistics gave updates on the labor market in February, alongside the readings on wage growth. The jobless rate fell to 4.2%, compared with 4.3% for January, to again reach its lowest since 1975, the Office for National Statistics said. The fall was driven by a rise in employment.

What are strategists saying?

“As geopolitical tensions surrounding Syria have just gone off the boil, the market is looking to get back to trading off fundamentals rather than knee-jerk news flow,” said Richard Perry, market analyst at Hantec Markets, in a note.

“Although the trade tensions rumble on in the background and are also a key factor to keep in mind, it was interesting to see Chinese growth data beating expectations overnight. China GDP for Q1 2018 was higher than expected at +6.8% (+6.7% exp, +6.8% last) and points to a continuation of a soft landing,” he added.

Read: China’s economy bucks forecasts with 6.8% growth

What stocks are in focus?

Shares of Associated British Foods PLC ABF, +3.76% ASBFY, -0.05%  rose 2% after the Primark parent said first-half pretax profit declined, but also backed its full-year guidance.

Bayer AG BAYN, +2.08%  added 2% after news its major shareholder Temasek will boost its stake in the German drug and chemicals maker.

TomTom NV TOM2, +3.26%  climbed 2.4% after the Dutch navigational-technologies group said it swung to a profit in the first quarter.

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