European Stocks Drop as Earnings Dampen Sentiment: Markets Wrap

(Bloomberg) — European stocks dropped Thursday on a raft of disappointing results from automakers and Societe Generale SA, erasing much of the previous session’s tech-fueled gains.

The Stoxx 600 index weakened 0.5% after BMW AG’s earnings slowed and German rival Volkswagen AG’s margins declined, with both automakers suffering from weak demand in China. A poor performance in Societe Generale SA’s retail unit sent the stock plummeting 7%, dragging down European peers such as HSBC Holdings Plc and UniCredit SpA.

The disappointing results serve as further evidence of building pressure for European companies on the back of softer demand and a macro backdrop that remains beset by challenges. The European benchmark has been trading sideways for the past two months after rallying in the year through May.

“People are a bit more concerned that we will see a sharper slowdown than what’s currently priced in,” said Richard Flax, chief investment officer at European digital wealth manager Moneyfarm. “We’ve seen downgrades to next quarter’s earnings. There’s also been some notable commentary from macro bellwethers about consumer spending. And that does give you pause.”

The risk-off mood in Europe also put a damper on US equity futures after a powerful rally in the previous session. S&P 500 and Nasdaq 100 contracts were little changed despite dovish signals from the Federal Reserve and a Meta Platforms Inc. sales beat.

Oil also extended gains after Iran reportedly ordered a retaliatory strike on Israel for killing a Hamas leader on its soil.

Traders are now watching Bank of England’s interest rate decision, the third major central bank meeting in two days. The monetary authority is expected to cut rates by 25 basis points, according to consensus forecasts compiled by Bloomberg.

In Asia, the yen extended its rally by 0.2% following Wednesday’s rate hike. Strategists are now suggesting the currency may strengthen as far as 140 versus the dollar after breaching the 150 mark on Wednesday.

The dollar edged higher against a basket of currencies after recording its worst day since May on Wednesday. Treasuries yields advanced two basis points to 4.05%.

Corporate Highlights:

• Societe Generale SA posted surging trading revenue even as its domestic retail unit continues to disappoint.
• Rolls-Royce Holdings Plc raised its profit guidance for the year and said it will reinstate dividend payments.
• Barclays Plc said it will repurchase as much as £750 million of shares as Chief Executive Officer C.S. Venkatakrishnan makes good on his promise to improve the bank’s payouts to investors.
• ING Groep NV’s profit beat analysts’ estimates on growing fees, prompting the lender to increase its revenue outlook.
• Anheuser-Busch InBev NV sold less beer than expected in the second quarter, hurt by a downturn in demand in China and slow claw back of sales in the US following the boycott of Bud Light.
• Saudi Arabia’s biggest chemical company beat analysts’ profit estimates in the second-quarter, an early sign the industry may be recovering after a challenging downturn.

Key events this week:

• Eurozone S&P Global Eurozone Manufacturing PMI, unemployment, Thursday
• US initial jobless claims, ISM Manufacturing, Thursday
• Amazon, Apple earnings, Thursday
• Bank of England rate decision, Thursday
• US employment, factory orders, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.5% as of 10:04 a.m. London time
• S&P 500 futures were little changed
• Nasdaq 100 futures were little changed
• Futures on the Dow Jones Industrial Average fell 0.1%
• The MSCI Asia Pacific Index fell 0.7%
• The MSCI Emerging Markets Index rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%
• The euro fell 0.4% to $1.0781
• The Japanese yen rose 0.2% to 149.72 per dollar
• The offshore yuan fell 0.3% to 7.2482 per dollar
• The British pound fell 0.7% to $1.2771

Cryptocurrencies

• Bitcoin fell 0.1% to $64,469.29
• Ether fell 1.3% to $3,180.2

Bonds

• The yield on 10-year Treasuries advanced two basis points to 4.05%
• Germany’s 10-year yield declined one basis point to 2.29%
• Britain’s 10-year yield declined four basis points to 3.93%

Commodities

• Brent crude rose 0.7% to $81.38 a barrel
• Spot gold fell 0.6% to $2,432.49 an ounce

This story was produced with the assistance of Bloomberg Automation.

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