European shares end week in the red as earnings disappoint
By Paolo Laudani, Ankika Biswas and Johann M Cherian
(Reuters) -Europe’s main stock index closed Friday’s choppy session flat and notched weekly losses, as a handful of weak corporate earnings from auto-related companies such as Mercedes-Benz (OTC:MBGAF) and Valeo (EPA:VLOF) and appliances-maker Electrolux dented investor sentiment.
The pan-European STOXX 600 closed flat for the second straight day and logged its first weekly loss in three, with real estate stocks (SX86P) among the worst-hit sectors for the week.
Auto stocks also ended the session on a muted note, with Germany’s Mercedes-Benz dropping 1% after third-quarter earnings in core car division missed estimates by a wide margin.
Valeo added to the sector’s woes, tanking 9.5% as the automotive supplier cut its annual sales guidance for the second time this year.
Electrolux slumped 14.6% to the bottom of the main index after missing third-quarter earnings expectations on continuing U.S. losses and rising competition from China.
Of the STOXX 600 companies that have reported third-quarter earnings, 35.3% beat estimates versus the typical beat rate of 54%, LSEG data showed earlier this week.
Equities have struggled of late, with the STOXX 600 losing momentum after hitting record highs multiple times this year, as investors navigate corporate earnings, the global rate-cut trajectory and the upcoming U.S. election.
Aiding some relief on the day, a survey showed German business morale improved more than expected in October, offering hope for some respite towards the year-end. Traders now brace for third-quarter gross domestic product data due next week.
“Even if growth this year turns out to be slightly negative, we believe the current state of the economy would be better described as stagnation than a recession. The big picture is that Germany’s economy has not grown for another year and remains stuck at pre-pandemic levels,” Robin Winkler, chief economist at Deutsche Bank, wrote.
In bright spots, lights-maker Signify jumped 10% and topped the STOXX as a largely in-line quarterly report and expectations of cost-cutting measures provided relief.
Sanofi (NASDAQ:SNY) added 2.5% and topped the French CAC 40 index after the drugmaker posted stronger earnings growth than analysts had expected in the third quarter, boosted by an earlier-than-anticipated start to the vaccination season.
Hexagon was up 3.8% after the Swedish industrial technology group said it is mulling a spin-off of its Asset Lifecycle Intelligence business.
British lender NatWest climbed 3.8% after raising its income forecast for 2024.
