Stoxx 600 ends lower with earnings season in full swing

EUROPEAN shares closed Wednesday’s choppy session in the red, with mining stocks among top drags, while weak earnings from heavyweights such as Germany’s largest lender Deutsche Bank and beauty giant L’Oreal pressured sentiment further.

The pan-European Stoxx 600 index declined 0.3 per cent, with bourses in major markets Germany, France and Italy also finishing lower.

Basic resources was the worst-hit sector, losing 1.4 per cent, with Sweden’s Boliden falling 2.3 per cent following a UBS rating downgrade to “sell” from “neutral”.

Earnings took centre stage with Deutsche Bank shares losing 2 per cent after the lender raised its forecast for bad loans against the backdrop of a weak German economy, which overshadowed its return to profit in the third quarter.

The stock was among top losers on the DAX and the European bank index dropped 0.5 per cent.

“While the stubbornly high provisions are a clear negative, we consider that some confidence was given by the guidance pointing to lower provisions for the fourth quarter and also for 2025,” said Suvi Platerink Kosonen, senior sector strategist, financials at ING Bank.

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L’Oreal stock fell 2.5 per cent to the bottom of the CAC 40 after missing third-quarter sales estimates due to reduced beauty products demand in China and slower growth for its dermatological division.

On the flip side, automobiles led sectoral gains with Stellantis up 3 per cent. Sweden-based Volvo Cars dropped 5.9 per cent to the bottom of the Stoxx index after cutting its full-year sales growth forecast.

Apart from corporate earnings, all eyes are on the still-too-tight-to-call US election and the trajectory of interest rate cuts across major central banks.

European Central Bank chief economist Philip Lane said the recent flow of relatively weak data on the euro zone economy has raised questions about the bloc’s recovery prospects.

Worries are that sluggish economic growth in the currency union could reflect in corporate performance this quarter. The Stoxx 600 index has made negligible progress from levels first hit in mid-May this year.

Of the Stoxx 600 companies to have reported third-quarter earnings, 35.3 per cent have beaten expectations, LSEG data showed on Tuesday, versus the typical beat rate of 54 per cent.

Among others, Akzo Nobel lost 3.5 per cent after announcing third-quarter sales and core profit misses.

Utilities were the biggest boost to the Stoxx index, with Iberdrola up 1.5 per cent after giving a bullish forecast for the coming years.

The financial services sector weakened, with London-listed Man Group dropping 2.7 per cent following a UBS rating downgrade to “neutral” from “buy”.

Thule topped the Stoxx 600 index, climbing 15.3 per cent, following better-than-expected earnings, with Cargotec right behind, up 9 per cent, after raising its full-year outlook. REUTERS

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Publish date : 2024-10-23 15:22:00

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