European stocks close at two-month highs propelled by earnings, defence stocks
The pan-European STOXX 600 index (.STOXX), opens new tab closed 0.6% higher, after touching a two-week intraday high.
Industrial stocks (.SXNP), opens new tab were among the biggest sectoral gainers, with aerospace and defence companies taking charge. The broader index (.SXPARO), opens new tab gained 2.2% after coming under pressure ahead of Friday's summit between U.S. President Donald Trump and Russian President Vladimir Putin.
Richard Flax, chief investment officer at Moneyfarm, said that despite expectations of Europe spending more on defence, questions remained about when it would come through and how much would go to European firms.
Upbeat corporate earnings reports also aided sentiment. Insurers (.SXIP), opens new tab were up 0.9%, after trading near record highs touched last Thursday earlier in the session.
London's Admiral (ADML.L), opens new tab hit a record high, rising 6.6% after a strong first-half profit, while Aviva (AV.L), opens new tab jumped 2.6% to its highest since December 2007, after raising its interim dividend after reporting stronger half-year operating profit.
Dutch payments firm Adyen (ADYEN.AS), opens new tab slumped 4.9% after it cut its annual revenue forecast.
Most regional indexes traded higher, with Britain's FTSE (.FTSE), opens new tab reversing earlier losses to gain 0.1%.
Markets have gained in recent weeks on optimism around the Federal Reserve delivering an interest rate cut as soon as next month. However, U.S. economic data on the day erased expectations of a 50 basis point cut next month.
"There's kind of continued optimism about prospect for lower rates in the US... PPI figures today tempered things a little bit, but the expectation continues to be that we'll see rates come down," said Flax.
Data showed Britain's economy slowed less than expected in the second quarter after a strong start to 2025, despite U.S. trade tariffs and a weaker jobs market, offering some relief to Finance Minister Rachel Reeves.
Among others, Embracer (EMBRACb.ST), opens new tab slumped 23.4%, its worst day since May 2023, and fell to the bottom of the STOXX 600, after the gaming company reported a first-quarter operating profit and forecast annual earnings well below market expectations.
Thyssenkrupp (TKAG.DE), opens new tab tumbled 8.7% after the German conglomerate cut its full-year outlook for investments and sales, citing disruption from U.S. tariffs.
FLSmidth (FLS.CO), opens new tab rose 6.7%, the most on STOXX 600, after the Danish mining and cement technology supplier reported second-quarter results and updated annual forecast.
Carlsberg (CARLb.CO), opens new tab fell 7.1% after the Danish brewer missed half-year profit and volume forecasts, and said it did not expect any improvement in the consumer environment this year.
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