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A batch of poorly-received earnings hit European bourses on Wednesday, with France leading declines amid fears of slowing demand for luxury goods.
The Stoxx 600 index
SXXP,
the Europe-wide stock barometer, fell 0.9% as the DAX 40
DAX,
in Frankfurt slipped 0.8% and London’s FTSE 100
UKX,
dropped 0.6%.
Doing most damage was the CAC 40
PX1,
in Paris, which slid 1.9% after LVMH
MC,
the owner of brands such as Tiffany and Louis Vuitton, delivered results in which it warned that while sales were holding up well in China there were signs an economic slowdown in the U.S. that was hurting demand for high-end clothes and handbags.
“LVMH suggested that the slip in U.S. demand was coming from its more aspirational customers, often online or in secondary cities. Demand from their wealthier customers is holding up better,” noted Steve Clayton, head of equity funds, Hargreaves Lansdown.
LVMH shares fell nearly 5%, while Kering
KER,
whose brands include Gucci and Saint Laurent, shed 3% and Hermes
RMS,
lost more than 2%.
U.K. banking stocks were struggling, with Lloyds
LLOY,
off nearly 3% following earnings and NatWest
NWG,
down nearly 4% after its chief executive resigned after admitting to leaking banking information on a conservative politician to the BBC.
Lloyds was hurt by a rise in impairments and concerns about net interest margins as political pressure builds to pass on recent Bank of England rate rises to depositors.
But Richard Hunter, head of markets at Interactive Investor, remained positive on the lender: “The balance sheet is clearly in rude health, and the bank announced an increase to the dividend which takes the projected yield to 5.5%. In terms of further financial returns, the previously announced £2 billion share buyback programme is now 75% complete.”
A notable outperformer was Rolls-Royce
RR,
whose shares jumped more than 20%. The aero engine maker said its turnaround plan was bearing fruit and an upsurge in airline travel helped it to raise its profit forecasts for the year.
“Rolls Royce is highlighting the early success of its transformation programme, which is driving productivity improvements. Civil Aerospace has swung back into profit, reflecting a stronger aftermarket outcome, while defense sector earnings are also sharply improved, with demand stronger and a more even pattern of deliveries this year compared to last,” said Clayton at Hargreaves Lansdown.
Strategists at Bank of America noted that the European earnings season had not go off to a very good start.
“[W]ith nearly 25% of companies having reported Q2 earnings so far, only 46% of companies have beaten on EPS [earnings per share], the weakest beat ratio since late 2019,” said the Bank of America team led by Andreas Bruckner.
“Companies that have missed EPS estimates saw 2% underperformance on the day, the most negative reaction in almost six years,” they added.
Away from stocks, the euro
EURUSD,
was little changed at $1.1062 and German 10-year government bond yields
TMBMKDE-10Y,
rose 3.7 basis points to 2.462% ahead of the European Central Bank’s monetary policy decision on Thursday. The ECB is expected to raise rates by a quarter point to 3.75%.
