European stocks fall as earnings signal slowing economy

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European stocks fell on Wednesday, hit by disappointing results from Wall Street tech giants, as bleak economic prospects overshadowed strong earnings at some of Europe’s biggest banks.

Tech stocks fell 1.8% to lead sector losses in Europe after their U.S. counterparts were dragged lower by weak results from Microsoft Corp and Alphabet Inc.

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Shares of Germany’s Deutsche Bank, Britain’s Barclays and Spain’s Santander came under pressure as they warned of risks after posting stronger-than-expected profits. The European banking index fell 0.7%.

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Italy’s UniCredit was a rare bright spot, its shares rising 3.9% after the bank raised its 2022 profit target.

“The impressive performances of UBS, Deutsche Bank and UniCredit serve to highlight the benefits of higher interest rates and large market movements,” said Joshua Mahony, senior market analyst at the online trading platform. IG.

“Nevertheless, we are likely to see some hesitation, as the economic implications of higher interest rates are yet to be felt. This golden loop situation of higher margins and economic health may soon come to an end given data evolution.

The pan-European STOXX 600 index slid 0.3% after hitting a more than a month high in the previous session on hopes that the US Federal Reserve will slow its pace of raising interest rates.

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A recent survey showed the euro zone is likely to slide into recession, with business activity contracting at the fastest pace in nearly two years this month as the cost of living crisis urges consumers to be cautious and undermining demand.

The focus is on Thursday’s European Central Bank policy meeting, where policymakers are widely expected to go ahead with another 75 basis point rate hike on Thursday in a bid to tame inflation.

« These bear market rallies are struggling to last very long with continued macro headwinds weighing on market sentiment, » said Victoria Scholar, chief investment officer at Interactive Investor.

Meanwhile, Britain’s new Prime Minister Rishi Sunak has postponed announcing a long-awaited plan to clean up the country’s public finances until November 17.

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London’s blue-chip FTSE 100 fell 0.6% as the pound rallied on the news, while the country’s exposed FTSE 250 index jumped 0.7%.

Among other individual stocks, Heineken NV fell 6.3% after the world’s second-largest brewery reported weaker-than-expected beer sales growth in the third quarter and said it saw signs of slowing growth. demand in some European markets.

ASM International fell 8.3% after the chip supplier said it expected new U.S. export restrictions to weigh heavily on its sales in China. (Reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur and Saumyadeb Chakrabarty)