European shares muted as investors assess Middle East developments, corporate earnings

EUROPEAN shares were little changed on Thursday as investor worries over collapsed US-Iran peace talks and weak economic data outweighed upbeat corporate results.

The pan-European Stoxx 600 index closed flat at 614.20 points.

Regional bourses were mixed, with France’s CAC 40 rising 0.9 per cent, while Spain’s IBEX 35 dropped 0.7 per cent.

Iran released footage of commandos storming a cargo ship, underlining its grip on the Strait of Hormuz following the collapse of peace talks. The developments left markets nervous about the durability of the fragile ceasefire.

European equities remain below pre-war levels with analysts pointing to their vulnerability to high energy prices, lagging behind their US peers as Wall Street indexes trade near record highs.

“Europe has a lot of industrial sectors that are cyclically impacted. I’m not talking about defence-related, which will be more shielded, but in terms of the exposure to the global economy,” said Janet Mui, head of market analysis at RBC Brewin Dolphin.

“Analysts will be very closely watching the sector divergence within European sectors because of the impact of the war, the renewed inflation pressure, and also the weakening growth backdrop.”

Corporate earnings on tap

Company results offered some relief. The outlook for European corporate health has slightly improved, the latest LSEG data showed, with blue-chips excluding energy expected to report a 0.4 per cent increase in first-quarter earnings.

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Wall St opens lower on Middle East impasse, mixed earnings

Nestle shares jumped 5.9 per cent after the world’s biggest packaged food company said it had seen “very little impact” on global business from the Iran war so far. The food and beverages index rose 1.6 per cent.

The telecom sector climbed 1.6 per cent, aided by Nokia’s 6.4 per cent surge after the network gear maker raised growth targets for its AI business and beat first-quarter profit estimates.

The personal and household goods index gained 1.3 per cent. L’Oreal shares jumped 9 per cent, recording its biggest one-day gain since 2008, after the French cosmetics group posted first-quarter sales that beat analysts’ expectations.

Safran rose 2.4 per cent after the French jet engine maker said it expected its missile propulsion business to grow sharply over the medium term, adding that the Middle East conflict was not expected to significantly affect the second quarter.

The healthcare sector edged 0.2 per cent higher. French drugmaker Sanofi rose 1.2 per cent after reporting first-quarter results above expectations.

Roche shares rose 3.8 per cent, despite the Swiss drugmaker flagging a drop in first-quarter sales due to foreign exchange impact. Bloomberg reported that the firm’s cancer pill would be launched by year end.

But banking shares dropped 1.2 per cent, weighing heavily on the index.

On the economic front, business activity in the euro zone suffered a surprise contraction in April with the Iran war sapping demand as prices soared. REUTERS