Inflation fears take toll on European stocks ahead of earnings
European shares fell on Tuesday as investors worried that soaring commodity prices would hamper a recovery in corporate profit, with fresh signs of troubles at property developer China Evergrande also hitting confidence.
The pan-European STOXX 600 index fell 0.6% in morning trading, hovering about 5% below its August peak. Asian stocks also fell after Evergrande missed its third round of bond payments in three weeks. [MKTS/GLOB]
Mining stocks gave up some of Monday’s strong gains as a rally in commodity prices lost some steam, while banks and automakers shed more than 1%. [O/R] [MET/L]
“Going into Q4 we’re usually quite strong but with earnings season and inflation combining at this point in time, we’re seeing risk-off,” said Chris Beauchamp, chief market analyst at online trader IG.
“But notably US banks were much stronger the last few days and are going back towards record highs in many cases, and that’s more an indication of where the strength is and where the enthusiasm is for the earnings season at the moment.”
U.S. bank JPMorgan is set to kick off earnings on Wednesday, while France’s LVMH will set the tone for luxury goods makers in Europe with its report later in the day.
Worries about soaring energy prices and other supply chain constraints have clouded the outlook for third-quarter earnings season as a post-lockdown momentum in the global economy cools and major central banks consider withdrawing stimulus.
The STOXX 600 is nearly flat on the month, in percentage terms, after shedding 3.4% in September.
Low-cost airline EasyJet fell 2.5% after it estimated a loss of above 1 billion pounds for the 12 months ended September.
Airbus slipped 1.9% as the world’s largest planemaker’s deliveries were flat in September versus the previous month.
Freight forwarder DSV inched up 1.9% after it raised its earnings expectations for the year, citing brisk business activity in the third quarter and continued tight capacity in the market.
Automakers were down 1.5% as data showed auto sales in China – a major trading partner of Europe – slumped 19.6% in September as a prolonged global shortage of semiconductors and a domestic power crunch disrupt production.
Defensive sectors such as utilities and real estate were the among the few gainers.
