Europe: Shares pare losses as ECB holds rates steady, earnings gloom weighs
EUROPEAN shares pared early losses on Thursday (Oct 26) after the European Central Bank (ECB) kept its interest rates steady as expected, while downbeat corporate updates, including from Standard Chartered weighed on the benchmark index.
The pan-European Stoxx 600 index ended 0.5 per cent lower, with automakers leading declines.
The ECB left interest rates unchanged at 4 per cent, snapping an unprecedented streak of 10 consecutive hikes, and maintained its guidance, signalling steady policy ahead.
“It is clearly of the view that keeping rates at this level for long enough will do the job of getting inflation back to its 2 per cent target,” said Neil Birrell, chief investment officer at Premier Miton Investors.
Healthcare was one of the weak performers, as Straumann tumbled nearly 10 per cent after the Swiss dental implants maker’s US peer Align Technology cut its full-year revenue forecast.
A raft of downbeat earnings also weighed on the index, with shares of Siemens Energy plunging 35.5 per cent to record lows after the German company said it was in talks with the government about state guarantees after major setbacks at its wind division.
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Standard Chartered slumped 12.4 per cent as the bank’s third-quarter pre-tax profit dropped 33 per cent, while a fall in trading revenue pushed BNP Paribas down 2.6 per cent.
Swedbank shed 6.9 per cent after third-quarter net interest income fell short of expectations.
“When interest rates get this high, it tests banks,” said Michael Field, European equity strategist at Morningstar.
“Those exposed to certain areas of the economy for the last couple of years are able to withstand it and benefit from it, but others simply aren’t.”
Automakers fell 2.1 per cent, weighed by a 5.8 per cent decline in Mercedes-Benz post a drop in third-quarter earnings and a 9.5 per cent fall in Swedish automaker Volvo Cars. HelloFresh sank 10.3 per cent, with the German meal kit-maker’s third-quarter earnings missing expectations, while a drop in sales dragged consumer giant Unilever’s shares down 2.8 per cent
On the upside, BE Semiconductor rose 13 per cent, among top gainers of Stoxx 600 as the Dutch company’s third-quarter gross margin beat estimates.
Swedish defence contractor Saab climbed 2 per cent, helped by a jump in quarterly profit.
Lisbon’s PSI index outperformed regional markets, up 2.2 per cent, boosted by a 10.6 per cent increase in Jeronimo Martins after the retailer’s third-quarter profit surged.
Overall, analysts now expect Stoxx 600 earnings to slump 9.7 per cent in the third quarter, bigger than a 6.6 per cent decline projected at the beginning of July, per LSEG data. REUTERS
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