Europe Stocks Fall Amid Investor Anxiety Over Earnings, Stimulusby and
Ericsson posts worse-than-expected third-quarter profit, sales
Glencore leads commodity producers higher as metals advance
European stocks retreated for a second day amid investor concern about corporate earnings and the implications of an expected tightening of U.S. monetary policy.
Ericsson AB dragged technology shares to the worst performance on the Stoxx Europe 600 Index, tumbling 20 percent, the most in nine years, after reporting a slump in third-quarter sales and profitability. Finnish peer Nokia Oyj dropped 5.1 percent. Glencore Plc led commodity producers to the biggest gains on the European equity benchmark as metals prices climbed.
The Stoxx 600 fell 0.5 percent to 338.56 at the close of trading. Investors are watching this earnings season for indications of the health of corporate Europe, with analysts forecasting a 4.2 percent contraction in annual profit for the equity gauge’s members. The U.K.’s FTSE 100 Index, which touched an intraday record on Tuesday, lost 0.7 percent today as the pound rebounded.
“Everyone is looking at what’s still coming up in 2016, not wanting to take a huge amount of risk and preserving as much capital as possible,” said Alan Higgins, chief investment officer at Coutts & Co. in London. His firm oversees the equivalent of $18 billion. “The market will need some reassurance that a soft start to earnings season has been nothing more than a few outliers. Investors are also building in a higher probability of a Fed hike as each week goes past. These next few months will be very busy.”
European stocks have had a rocky start to October, a month in which they have advanced in five of the past six years. Monday’s rebound on oil proved short lived, as concerns resurfaced about corporate earnings and whether the U.S. economy is sufficiently robust to cope with higher interest rates. Minutes from the Federal Reserve’s most recent decision, due after the European close today, will be parsed for indications of the possible trajectory of rates.
The Stoxx 600 fell in four of the past five weeks as traders boosted bets that the Fed will hike borrowing costs before the end of the year amid encouraging economic data. The odds of an increase in December stand at about 67 percent, up from about 50 percent two weeks ago. Concerns over how much central banks are willing to support economic growth were exacerbated last week by a report that European policy makers have held discussions on the best way to taper quantitative easing.
Fluctuating oil prices have also played a part in the Stoxx 600’s oscillations. Russia and OPEC met in Istanbul today to discuss an output pact. Supply and demand will come back into balance earlier than expected if the group’s accord to trim output is implemented, the International Energy Agency said.
Among other stocks moving on corporate news today, Lloyds Banking Group Plc fell 1.1 percent after a labor union said Britain’s largest mortgage lender plans to eliminate about 1,340 jobs as part of a cost-cutting program.
Fiat Chrysler Automobiles NV slipped 1.4 percent after people familiar with the matter said that talks with Samsung Electronics about a partnership with the carmaker’s parts unit have stalled because the Korean company is focused on resolving the Galaxy Note 7 smartphone crisis.