Europe: Shares hit two-week low as dismal earnings add to risk-off mood
EUROPEAN shares lost ground on Thursday (Oct 19) as a raft of downbeat corporate earnings, including from packaged food giant Nestle, worsened the risk-averse mood, driven by jitters around the Middle East war and uncertainty over interest rates.
The pan-European Stoxx 600 fell 1.2 per cent hitting a two-week low, in a broad-based sell-off.
European stocks have seen steep declines this week, sliding for the third straight session, hit by Middle East tensions and interest rate worries following robust US economic data and mixed earnings reports.
Geopolitical tensions continued to mount as Israel pounded Gaza with more air strikes on Thursday. British Prime Minister Rishi Sunak followed US President Joe Biden on visits to demonstrate Western support for the war against Hamas.
Further pressuring equities, US Treasury yields jumped to multi-year highs, awaiting commentary by Federal Reserve chair Jerome Powell, with the bond sell-off pushing Italian bond yields to an 11-year high.
“A mix of inflation worries plus US resilience is clearly the main driver why markets have repriced again the odds of another rate hike by the Fed later this year,” said Thomas Hempell, Head of Macro & Market Research at Generali Investments.
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“(There’s) uncertainties about the behaviour of the Fed, and clearly that overlaps with the Middle East tensions.”
Rate-sensitive real estate firms led sectoral declines, dragged by a 14.3 per cent fall in Britain’s Rightmove Plc after US real estate firm CoStar agreed to buy the property portal’s rival OnTheMarket.
Nestle dropped 3.4 per cent after the Swiss consumer giant posted lower-than-expected nine-month sales growth as higher product prices made shoppers baulk.
France’s CAC 40 index slid to a seven-month low with Renault down 7.3 per cent after the French carmaker’s third-quarter revenue missed analysts’ expectations.
Nokia lost 6.4 per cent as the Finnish telecom gear group announced plans to slash jobs after posting a drop in its third-quarter sales.
The stock was among top losers on Finland’s OMX HELSINKI 25 index which dropped 1.6 per cent to a three-year low.
Roche Holding lost 4.4 per cent as the drugmaker’s third-quarter sales were hit by lower demand for Covid-19 products.
Europe’s technology sector was the only sector in the green, up 0.5 per cent, with SAP jumping 5.1 per cent after reaffirming its full-year cloud business revenue outlook.
Pernod Ricard gained 4.8 per cent after the French spirits maker said it expected to grow sales over the coming year, despite a difficult first quarter.
Britain’s Rentokil Initial slumped 18.6 per cent to the bottom of the Stoxx 600 after the pest control firm flagged weaker demand in North America, its biggest market.
Meanwhile, UK’s London Stock Exchange said it was currently investigating an incident and that only FTSE 100, FTSE 250 and IOB securities were available for trading. REUTERS
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