By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- European stock markets climbed to an almost eight-week high on Wednesday after better-than-expected purchasing managers' indexes from the region spurred hopes about an economic recovery.

The Stoxx Europe 600 index added 0.6% to 301.10, closing at the highest level since late May.

"It seems like a nice tactical move to play the euro zone at the moment. There's a good benefit from the stronger euro and quite decent market performance. But ultimately investors will be quite cautious on the region in the medium term," said Guy Foster, head of portfolio strategy at Brewin Dolphin.

"We're still talking about unemployment above 12% in the euro zone and that won't be tolerated for a long time. We can certainly hope -- we are quite optimistic -- that unemployment won't worsen from these levels."

"But the underlying trend is one in which valuations still overwhelmingly favor equities. If the earnings season turn out a bit better than expected and we see more topline growth in the euro zone that would be quite encouraging for investors," he added.

Earnings were also in the spotlight on Wednesday, with several firms posting solid gains after releasing results.

Shares of easyJet PLC added 3.7% after the budget airline said third-quarter revenue grew by 10.5%.

Shares of truck maker Volvo AB added 5% after the Swedish firm repeated its forecast for demand for heavy-duty trucks in Europe and said order intake continued at a high level in the second quarter.

Upbeat PMIs

More broadly, investors digested the preliminary PMI releases from France, Germany and the euro zone, all coming in slightly better than anticipated. The composite euro-zone index climbed to an 18-month high of 50.4 in July from 48.7 in June, moving above the 50-mark that separates expansion from contraction. The consensus estimate ahead of the data was 49.3, according to FactSet. Read: With PMIs at 18-month high, euro zone poised to emerge from recession

Analysts at Société Générale called the reading "impressive" by all standards and said "it seems that PMIs indexes were too low during the spring when compared with hard data and that business sentiment has been catching up for the last three months."

"This suggests that executives' sentiment probably overreacted to political and fiscal uncertainties in the first half of the year," the added.

In Germany, the composite index climbed to a five-month high of 52.8, while France's similar poll moved up to a 17-month high at 48.8.

Germany's DAX 30 index rose 0.8% to 8,379.11, while France's CAC 40 index added 1% to 3,962.75.

The U.K.'s FTSE 100 index gained 0.4% to 6,620.43.

PMIs were also in focus in China on Wednesday, although not as optimistic. The "flash" version of HSBC's Chinese manufacturing PMI dropped to 47.7, an 11-month low. Chinese stocks closed lower.

European stock markets pared gains in the afternoon as U.S. stocks drifted lower after the open as investors digested earnings from Boeing Co. (BA), Apple Inc. and Caterpillar Inc. (CAT).


Spanish banks were among biggest advancers in Europe on Wednesday, as analysts at Citigroup lifted the price targets of most of the country's major banks. Shares of BBVA SA (BBVA) gained 2.7%, Banco Santander SA (SAN) picked up 2.5% and Banco Popular Español SA climbed 5.5%. The IBEX 35 index closed 1.5% higher at 8,192.50.

Among other notable movers, Daimler AG rose 1.4% after the car maker said profit almost doubled in the second quarter.

Shares of Kingfisher PLC put on 3.1% after the home-improvement retailer said comparable sales rose 2.5% in the 10 weeks to July 13.

On a more downbeat note, shares of Syngenta AG lost 4% after the chemicals firm reported a drop in first-half earnings per share.

Tod's SpA dropped 3.9% after UBS cut the luxury-goods firm to sell from neutral, citing an outlook for below sector-average earnings growth over the next three years.

Shares of STMicroelectronics shaved off 3.2% after Bank of America Merrill Lynch cut the chip maker to underperform from buy.

Another chip maker, ARM Holdings PLC (ARMHY) lost 1.1% after posting a drop in first-half profit although revenue rose 27%.

Subscribe to WSJ:

Tod`s (BIT:TOD)
Historical Stock Chart
From Jun 2024 to Jul 2024 Click Here for more Tod`s Charts.
Tod`s (BIT:TOD)
Historical Stock Chart
From Jul 2023 to Jul 2024 Click Here for more Tod`s Charts.