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By Keith Weir
LONDON, July 29 (Reuters) - Carmaker Volkswagen,
plane maker Airbus and energy major Royal Dutch Shell
all posted bumper financial earnings on Thursday
reflecting a generally buoyant mood among European companies
emerging from the coronavirus pandemic.
European stocks hit record highs, taking their cue from the
positive outlook and increased investor payouts offered by many
companies reporting on one of the busiest days on the financial
calendar.
There were some clouds on the horizon -- strong sales
figures from Swiss foods group Nestle and brewer
Anheuser Busch InBev were offset by concerns about the
impact of higher costs on their businesses.
Volkswagen trimmed its estimate for an increase in car
deliveries to customers because of a shortage of computer chips,
and Finnish telecoms equipment maker Nokia also
warned that the same issue was putting the brakes on its healthy
growth.
But business is clearly picking up from the lows of 2020
when efforts to contain the coronavirus forced consumers to stay
home and businesses to cut output.
Analysts at investment house Pictet said equities in
developed markets were enjoying "a positive feedback loop in
2021, with stronger economic recovery increasing sales growth,
improving margins and earnings set to rebound by 40% in 2021 in
the US and Europe."
Airbus, now the world's largest planemaker, led the way by
doubling its full-year profit forecast and raising the outlook
for jet deliveries.
Shell boosted its dividend and launched a $2 billion share
buyback programme after a sharp rise in oil and gas prices drove
second quarter profits to their highest in more than two years.
It joined peers TotalEnergies and Norway's Equinor
in announcing share buybacks as companies throw off
more cash than they can reinvest.
Figures earlier in the week showed the luxury goods industry
has rebounded strongly since the start of the year, fuelled by
robust demand in Asia and the United States for European brands
such as Louis Vuitton and Gucci.
NOT OVER YET
The prospect of higher interest rates, combined with the
risk of increased regulation, has dragged on investor sentiment
in the tech-heavy U.S. markets, giving indices across the
Atlantic an edge.
"In Europe, having more industry than tech is good for index
profits, which I expect to be revised upwards," said Angelo
Meda, head of equities at Banor SIM in Milan.
In Britain, Lloyds Banking Group swung to a
first-half profit and announced an interim dividend, boosted by
a house-buying frenzy and improved economic outlook.
The positive update from the bellwether mortgage lender came
after rival Barclays also posted upbeat earnings on
Wednesday, and showed how banks' profits are recovering as fears
of pandemic-related bad loans ebb.
Quarterly revenue at AB InBev, whose brands include
Budweiser and Stella Artois, rose above pre-pandemic levels as
bars reopened around the world and drinkers emerged to toast the
end of lockdown.
Increased costs of cans and distribution weighed on profits
in its two biggest markets, the United States and Brazil,
amplifying inflation warnings from consumer goods giants
Unilever and Reckitt Benckiser this month.
Monetary policy experts around the world are pondering how
to respond to higher costs and debating whether the trend is
temporary or more deeply rooted.
"Inflation has been virtually absent for a number of years
and then pointed up very sharply. It hit us directly," said
Nestle CEO Mark Schneider, adding he believed the problem was
transitory.
Smurfit Kappa, one of the world's biggest packaging
groups, warned on Wednesday that prices would keep climbing.
"It's very hard to see that inflation is not here to stay.
Since the end of last year I've been saying we're seeing very
significant increases and it's hard to see that they're
temporary because there is still so much demand out there," CEO
Tony Smurfit told Reuters.
There are also concerns that coronavirus could once again
upset the best laid business plans, given the risk posed by the
Delta variant.
"COVID-19 is not over," Airbus Chief Executive Guillaume
Faury told reporters on Thursday.
"Levels of vaccinations are very diverse around the world
and we cannot exclude that after the Delta variant there will be
another one, so we believe we have to remain very prudent," he
said.
"It is going to a bumpy road in terms of recovery."
(Additional reporting by Danilo Masoni in Milan; Writing by
Keith Weir; Editing by Carmel Crimmins)
