European shares hit 6-week high on US trade deal optimism, earnings boost

By Twesha Dikshit

(Reuters) -European shares scaled a six-week high on Thursday, helped by upbeat results from the likes of Deutsche Bank and BNP Paribas, and optimism surrounding the EU-U.S. trade agreement, ahead of a European Central Bank meeting.

The pan-European STOXX 600 index gained 0.5% by 0817 GMT after hitting its highest since June 11 in early trading.

Most regional bourses were in the green, with Germany's blue-chip DAX adding 0.9% and the UK's FTSE 100 advancing 0.6% to an all-time peak, on pace for a sixth straight session of gains.

In a busy day for corporate results, banks were in a bright spot after second-quarter profit beat from Deutsche Bank and BNP Paribas.

The German lender Deutsche Bank climbed 5.8%, while French bank BNP Paribas added 2.8%. The eurozone banks index rose to its highest since 2008, aided by a rise in government bond yields.

The anticipated trade deal between the U.S. and European Union would impose a broad 15% tariff on imports from the bloc, avoiding a harsher 30% levy planned from August 1, two EU diplomats said on Wednesday.

"15% is a good number ... this would imply a meaningless price increase for companies which are exporting to the U.S. This could be totally manageable for the whole supply chain in different industrial sectors and clearly could be potentially also absorbed by the final customers," said Simone Ragazzi, portfolio manager at Algebris Investments.

The move would follow Japan's trade deal with the U.S. that lowered auto tariffs and sent automobile shares soaring on Wednesday.

Cooling trade tensions have lifted the STOXX 600 about 19% from its lows in April after U.S. President Donald Trump slapped steep tariffs on its trading partners. The index still remains about 2% away from its March historic high.

Roche gained 0.8% after the Swiss drugmaker reported better-than-expected first-half operating profit, while Deutsche Telekom <DTEGn.DE> rose 3% after its U.S. subsidiary T-Mobile <TMUS.O> posted strong second-quarter results. Both were among the major boosts to the benchmark STOXX 600.

Meanwhile, Nestle dropped 3.4% after the Swiss consumer major announced a strategic review of its vitamins business and posted first-half results.

Chipmaker STMicro slumped 10.5% after its first quarterly loss in more than a decade, in contrast to other tech titans Alphabet and SK beating earnings expectations.

Adding to the upbeat mood, a latest survey showed euro zone business activity accelerated faster than forecast this month, supported by a solid improvement in the bloc's dominant services industry and with manufacturing showing further signs of recovery.

Later in the day, focus will shift to the ECB, which is widely expected to keep rates steady at 2% after seven consecutive cuts.

(Reporting by Twesha Dikshit and Medha Singh in Bengaluru; Editing by Sumana Nandy)