European shares poised for quiet end to strong week, earnings loom

By Kit Rees

LONDON (Reuters) - European shares were poised for their best week in more than two months as investors piled back into equities on signs that the world's major central banks would likely not tighten monetary policy as quickly as some had feared.

The move on indexes on Friday was more muted as investors hunkered down ahead of earnings reports from major U.S. banks including JPMorgan and Citigroup later in the day.

The pan-European STOXX 600 index was flat in percentage terms by 0852 GMT while euro zone bluechips were little changed.

"In Europe, we're still not dealing with any higher interest rates, which should be benefiting the U.S. (banks) slightly in terms of net interest margin," Mike van Dulken, head of research at Accendo Markets, said.

"That said we've still got the supportive QE helping, but yields are still low, which is not great for the banks."

Accendo Markets' van Dulken added that Federal Reserve Chair Janet Yellen had been very non-committal in her comments about both interest rates and the balance sheet.

Firmer metals prices underpinned gains on mining stocks.

Miners were led higher by steel firms Outokumpu, ArcelorMittal, and Tenaris which rose after U.S. President Donald Trump said that he was considering quotas and tariffs on Chinese steel dumping.

Analysts at Barclays said that they remained positive on the European mining sector, which has gained just 4 percent so far this year after rallying more than 60 percent in 2016.

"Chinese rates are falling, demand indicators across the economy appear healthy, industry capex discipline is holding, M&A is generally off the agenda, and resulting strong cashflows are being utilised for balance sheet reconstruction and distributions to shareholders," Barclays analysts said in a note.

While a rise in bond yields has hit rate-sensitive sectors such as utilities, banking stocks have instead benefited and the sector was roughly flat as Swedish lender SEB jumped around 2 percent after its second-quarter profit topped forecasts.

Other Nordic stocks were also in focus as Norwegian insurer Gjensidige slumped 6.5 percent to the bottom of the STOXX 600 after its second quarter results came in below forecasts.

It was joined by Swedish construction group Skanksa, which dropped nearly 5 percent after it warned that its second-quarter profit would be hit by project writedowns in the U.S. and Britain.

European earnings get underway in earnest only later this month. Overall, analyst are calling for about 9 percent year-on-year earnings growth for top European firms, compared to about 8 percent for the U.S., according to Thomson Reuters I/B/E/S.

(Reporting by Kit Rees, Editing by Vikram Subhedar and Toby Chopra)