European stocks posted modest gains in early Wednesday trading, powered by solid auto sector sales and a improving corporate sentiment, but investors kept a cautious eye on global geopolitical risks and electoral developments in and around the region.
The benchmark Stoxx Euro 600 Index, the broadest measure of share price performance, was marked 0.3% higher at 377.49 in the opening two hours of trading, pushed by rising auto sector stocks. Germany's DAX index was holding on to a 1.4 point gain, while France's CAC-40 added 3 points.
Britain's FTSE 100, however, continued to underperform, falling 18 points, or 0.25% on the back of weaker basic materials and energy stocks and a 6% slump for luxury goodsmaker Burberry Plc (BURBY) . Gains were also held down by the two-day advance of the pound, which has risen more than 2.5% against a weaker U.S. dollar to 1.2833 after Prime Minister Theresa called for an early national election in order to shore up her domestic political support as she prepares to begin negotiations with officials in Brussels over the country's EU exit.
European automakers were the standout stocks in early trading, however, after stronger-than-expected sales data and increasing positive signals from key markets in China.
Car registrations for the month of March jumped more than 11% from last year, according to figures from the European Automobile Manufacturers' Association (ACEA), taking the first quarter total to 4.26 million units. Toyota Motor Co (TM) , Fiat Chrysler (FCAU) and Nissan Motors (NSANY) led the gains, posting high double-digit increases for the month, according to AECA tables. European manufactures saw slightly more modest gains, with Volkswagen AG (VLKAY) notching a 6.2% advance and French rivals Renault (RNLSY) and PSA Group (PUGOY) growing sales by 14.4% and 6.7% respectively.
Market reaction to the figures, however, was robust across the board, with VW again topping the DAX performance index with a 2.4% gain to take the stock to a 3 week high of €143.95 each by 11:00 CET. Renault shares were also on the move in early trading, rising 2.5% to €80.01 each while PSA Group was seen 1.5% higher at €17.63 each.
The region-wide Stoxx Europe 600 Automobiles and Parts Index was marked 1.42% higher at 550.69, putting the benchmark in positive territory for the year.
Burberry was another mover of note, falling to a three month low in early London trading Wednesday after the luxury goods makers posted weaker-than-expected second half sales growth Wednesday and a slowdown in fourth quarter activity linked to a "challenging environment" in North American markets.
The luxury goods maker said retail revenues for the six months ending in March grew 3% on an underlying basis to £1.268 billion thanks to growth in China and Asia Pacific markets. However, total revenues for the period slipped 1% to £1.607 billion, the company said, "with performance reflecting the implementation of strategic priorities and actions to improve brand positioning, notably in the US and in Beauty."
Burberry shares fell more than 5.7% in the opening two hours of London trading to change hands at 1,604 pence each, the lowest since Jan. 17 and the biggest single-day decline in at least six months.
Broader risk appetite diminished as a result of a slower-than-expected start to the first quarter earnings session on Wall Street and rising geopolitical tensions between the United States and North Korea.
Asia markets were reflective of that concern, although trading was mixed with the MSCI Asia ex-Japan index falling 0.55% and the Nikkei 225 clawing its way into a small 0.07% gain by the close of the session as investors shrugged off the stronger yen.
That cautious tone was evident on Wall Street Tuesday, with major indices closing in the red as mixed earnings results dragged markets down and slumping bond yields pulled the dollar to multi-month lows.
The S&P 500 fell 0.29%, the Dow Jones Industrial Average dropped 0.55%, and the Nasdaq fell 0.12%. The financial and health care sectors dragged markets lower. Goldman Sachs' (GS) first-quarter earnings came up short, and Johnson & Johnson's (JNJ) revenue missed forecasts.
Goldman Sachs reported first-quarter profit and revenue that came in below Wall Street's expectations. The stock declined 4.7%, the drag taking about 70 points off the Dow. A decline in stock trading revenue hurt the bank as it reported earnings of $5.15 a share on revenue of $8.03 billion. Analysts expected the company to report earnings of $5.31 a share on revenue of $8.45 billion.
J&J shares fell 3% after the company reported earnings of $1.83 a share, beating Wall Street estimates, but revenue of $17.77 billion came in below expectations.
Early indications from U.S. futures prices point to another pullback at the opening bell, with the Dow likely to fall around 2 points at the start of trading and the broader S&P 500 set for a modest 4.75 point gain.