Insurers Help Drive European Share Prices to New 2-month high

Robust insurer earnings helped drive European shares to a two-month high on Friday, while mixed U.S. jobs data supported the view the Federal Reserve may be more cautious about cutting back on its economic stimulus.

The STOXX Europe 600 Insurance index saw solid gains, up 0.9 percent, with Europe’s No. 2 insurer AXA ahead 2.2 percent after forecast-beating results. Peer Allianz, whose operating profit grew more strongly than expected, rose 0.8 percent.

The FTSEurofirst 300 closed up 0.3 percent at 1,224.74 points, its highest close since May 30.

The key U.S. jobs report showed non-farm payrolls rose by 162,000 in July, below expectations, although the unemployment rate fell.

That mixed data caused a period of index volatility after the release, as investors considered what it may mean for the timing and scope of any pullback in Fed stimulus, before it ended close to its pre-data release level.

“I think the markets have not quite shrugged it off but they really aren’t that phased by it… Maybe this means that we’ll get an extra couple of months of QE (quantitative easing),” David Jones, chief market strategist at IG, said.

Company earnings dominated the market on Friday. Italy’s top phone group Telecom Italia fell 4.2 percent after cutting its guidance on 2013 core profit and due to political worries in Italy.

Italy’s benchmark FTSE MIB index fell 0.2 percent after a court ruling upholding a tax fraud conviction against Silvio Berlusconi on Thursday raised questions about the ruling coalition’s stability.

The euro zone’s blue-chip Euro STOXX 50 index – up 13 percent since late June, its biggest rally in 2013 – has hit ‘overbought’ territory, charts showed.

But technical analysts remained bullish on the index, which on Friday firmed 0.1 percent to 2,811.00 points.

“The major caveat to the bull case at this stage is that the index looks pretty overbought… That said, it would be surprising if… 2,851 or so, were not tested before long,” Charles Stanley analyst Bill McNamara, said.

While the current European earnings season has proved lackluster so far, analysts reckon the market is looking through these figures, anticipating a pick-up in quarters to come as recent improving macroeconomic data filters through.

Of about 59 percent of STOXX Europe 600 firms to have reported second-quarter results, 55 percent have met or beaten market forecasts, Thomson Reuters StarMine showed.

“(Markets are) a little bit stretched, but looking forward 9-12 months then we’ve got scope to go quite a bit higher, (based on) earnings prospects,” said Ros Price, chief investment strategist at Seven Investment Management, which has over 4 billion pounds ($6.1 billion) of assets under management.