- STOXX 600 down 0.2 pct, Germany's DAX down 0.3 pct
- Luxury stocks rise on strong LVMH profit
- STMicro falls 3.4 pct as inline results not good enough
- Autos, tech reverse Tuesday's rally
Trade worries kept a lid on gains in European shares on Wednesday despite some strong earnings, as investors braced for a crucial meeting in Washington between the European Commission President and U.S. President Donald Trump.
The top-level meeting was expected to focus on trade and Trump’s threatened tariffs on U.S. car imports, and the trade-sensitive DAX was down 0.3 percent with car stocks falling 0.6 percent in a tense market.
The pan-European STOXX 600 fell 0.2 percent from five-week highs hit on Tuesday, with tech and mining stocks the biggest weights as trade tensions returned to the forefront of investors’ minds.
Luxury stocks gained after conglomerate LVMH reported strong profits, taking the shares up 1.7 percent and boosting France’s CAC 40 up to outperform European peers.
LVMH hovered near record highs after saying Chinese shoppers were still snapping up goods at its major brands including Louis Vuitton.
“The strong trading environment, coupled with confirmation of no change to underlying momentum in Q2, provides confidence for the broader peer group,” said Goldman Sachs analysts.
Gucci owner Kering rose 1.9 percent and Hermes gained 0.7 percent as the results soothed investors in the sector.
Tech stocks were dragged down by chipmaker STMicroelectronics, which fell 3.4 percent after reporting results in line with expectations, and slightly weaker margins.
Traders said in-line results were not good enough to drive further gains as investors expect strong growth from tech companies such as STMicro. Peer ASML also declined 1.5 percent.
While financials supported the market overall, Deutsche Bank shares fell 0.8 percent after the restructuring lender reported a 14 percent drop in net profit and a 17 percent drop in revenue at its bond trading division.
DWS, Deutsche Bank’s asset management arm, fell 1.2 percent after it cut its 2018 inflows target, citing increased market volatility due to rising trade tensions.
In encouraging results, Swiss drug ingredients maker Lonza rose 6.3 percent after upgrading its 2018 sales growth target.
French appliances company SEB jumped 9 percent after it also raised its sales growth guidance.
Telefonica Deutschland reported a loss of 12 million euros against traders’ estimates for 21.1 million, boosting the shares up 8.6 percent as investors cheered the strong results in a sector widely disliked by the market.
The biggest faller after results was British drug company Indivior, whose shares sank 18.5 percent after it said the blow from the launch of a copycat of its opioid addiction treatment would be bigger than expected this year.
And in dealmaking moves, Belgian insurer Ageas rose 5.6 percent after a report Chinese conglomerate Fosun was planning to bid for parts or the whole of the company.
Overall second-quarter European earnings growth is expected to come in at 8.1 percent year-on-year, better than the first quarter.
“Equities continue to be supported by strong earnings which have helped to reduce multiples to normal levels,” said Abi Oladimeji, chief investment officer at Thomas Miller Investment.
So far, healthcare and technology sectors have delivered the lion’s share of positive earnings surprises, while banks have also performed better than expected after analysts revised estimates down ahead of results.