Europe Stocks Fall From 1-Month High Amid Lloyds, Shell Earnings

  • Banks decline before stress-test outcome due tomorrow
  • More than 70 Stoxx 600 companies report results today

European Stocks Pull Back, End Four Days of Gains

European stocks dropped as investors assessed a slew of earnings reports and lenders fell before Friday’s stress-test results.

Lloyds Banking Group Plc and Royal Dutch Shell Plc fell after releasing results, while Rolls-Royce Holdings Plc and Adidas AG rose. On one of the busiest day for earnings updates this season, with more than 70 companies reporting, the Stoxx Europe 600 Index lost 0.9 percent at the close. Banks posted the biggest declines among groups, before regulators publish their latest health check on the industry.

The benchmark climbed to a one-month high yesterday after stalling for four sessions, helped by better-than-expected corporate results. It has rebounded 10 percent since a June 27 low following the U.K.’s vote to leave the European Union, but remains below its level on the day of the referendum. Peers in the U.S. and Asia have already recovered similar losses. Banks have suffered the most since Brexit, and are trading near their cheapest level relative to the Stoxx 600.

“The markets are now digesting all the previous gains after the Brexit decline,” said Philippe Gijsels, chief strategy officer at BNP Paribas Fortis in Brussels. “Earnings have generally been good, they’ve been more than decent apart from a few exceptions. Investors may be a bit hesitant at the moment as they’re waiting for the BoJ and after this strong rally that may indicate some overbought levels.”

A report today showed euro-area economic confidence unexpectedly improved in July, while economists had forecast a decline following the U.K.’s decision to secede. European Central Bank President Mario Draghi has said officials will wait for a clearer picture of the impact of Brexit before considering more stimulus, while investors are also awaiting an update from the Bank of Japan tomorrow for signs of looser monetary policy.

Of the stocks moving on corporate results, here are some highlights:
* Shell slid 2.9 percent after posting profit that was about half the average analyst estimate, while Saipem SpA lost 9.8 percent after lowering its 2016 forecasts.
* Lloyds fell 5.8 percent after lowering its guidance for 2016 capital generation, stoking concern about dividend growth.
* Telefonica SA declined 4.5 percent after sliding currencies in Latin America dragged on earnings
* Adidas gained 2.5 percent as it raised annual forecasts for revenue and profit
* Anglo American Plc added 5.4 percent on better-than-estimated first-half sales and earnings
* AstraZeneca Plc climbed 7.2 percent after its chief executive officer pledged to boost sales to at least $40 billion by 2023, easing concerns about the drugmaker’s pipeline
* Rolls-Royce jumped 14 percent after saying it’s on course to deliver a stronger second half of the year.
* Logitech International SA rallied 14 percent after the maker of computer mice reported quarterly earnings that topped analyst estimates and boosted its 2017 estimates

Some shares were also active on deal news: Anheuser-Busch InBev NV fell 2.5 percent after SABMiller Plc suspended an integration of the two brewers following a rebellion from shareholders who said they haven’t been compensated enough for the pound’s recent plunge. SABMiller lost 1.3 percent.

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