European stocks ease from record highs as investors weigh earnings, Middle East risks

[BENGALURU] European shares pulled back from record highs on Wednesday (Aug 12), as investors digested corporate earnings reports and developments in the Middle East.

This was while a benign US inflation reading eased concerns of a US Federal Reserve interest rate hike next month.

The pan-European Stoxx 600 closed 0.16 per cent lower at 659.48 points.

The benchmark has rallied in recent sessions on robust earnings, with LSEG estimates pointing at 22 per cent growth in second-quarter earnings.

However, with nearly half of that growth driven by the energy sector, investors remained wary that persistently high oil prices could stoke inflation in the energy-dependent region, with no signs of progress in US-Iran talks aimed at ending the Middle East conflict.

“The longer energy prices sustain at a higher level, workers could start demanding higher wages to accommodate inflation and that would put pressure on margins across the board for European companies,” said Martin Frandsen, portfolio manager at Principal Asset Management.

A senior Iranian official said that there was no progress on reviving an interim peace deal with US

Brent crude futures eased 0.1 per cent as traders weighed those comments against a lower demand forecast by the Organisation of the Petroleum Exporting Countries.

Meanwhile, US consumer prices rose in line with expectations in July, reducing the odds of an interest rate hike from the Fed in September.

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On the Stoxx 600, healthcare sector slipped 1.2 per cent, weighed down by EssilorLuxottica’s 4.3 per cent fall.

A German advocacy group filed a criminal complaint over Meta’s artificial intelligence glasses and units of the French eyewear maker for violating privacy laws.

The personal and household goods shares led losses with a 1.9 per cent dip.

Aerospace and defence index led sectoral gains, rising 1.1 per cent, as investors sought exposure to companies that typically benefit from heightened geopolitical risk.

The luxury sector was the biggest decliner, down 2.9 per cent.

Among individual movers, Nokia jumped 9.6 per cent following a better-than-expected forecast from US optical component maker Lumentum.

Investors also digested corporate earnings.

Bilfinger dropped 5.4 per cent, after the German industrial services provider trimmed its full-year margin expectations.

Danish wind turbine maker Vestas soared 19.7 per cent after raising its full-year outlook for earnings margin.

TKMS gained 8.5 per cent after the warship manufacturer raised its outlook for the second time in six months.

Kingspan rose 7.6 per cent after the Irish building materials company said on Tuesday it would acquire power management systems maker BMC Manufacturing for an initial upfront payment of 850 million euros (US$980.90 million), on a debt-free, cash-free basis. REUTERS