FRANKFURT: European shares settled lower on Tuesday, with German equities logging their biggest one-day drop in two months as a batch of disappointing corporate reports and dimming prospects of a US-European Union trade deal weighed on sentiment.
The pan-European STOXX 600 index closed 0.46% lower, with Germany’s DAX logging a 1.1% drop, easing further from a recent record high.
This earnings season is especially of interest for investors as they look for clues on how trade uncertainty and the euro’s recent surge are impacting European export-heavy corporates.
Latest earnings forecasts showed the outlook for European corporate health has slightly improved, although they are still expected to drop 0.3% on average, according to data compiled by LSEG. A year ago, STOXX 600 companies on average delivered a 3.0% increase in second-quarter earnings.
On Monday, Sartorius Stedim Biotech was among top losers on the STOXX 600, down 8.1% after the French lab supplies manufacturer reported its half-year results.
Switzerland’s Givaudan lost 5.4% after missing half-year sales forecast due to the Swiss franc’s 14% surge this year.Among major lenders, Julius Baer’s first half profit took a hit, pressured by loan loss provisions and a charge from the sale of its Brazilian wealth management arm, sending shares of the Swiss bank down 2.1%.
Keeping investors wary was also the lack of progress on prolonged negotiations between the US and Europe as they brace for the EU potentially announcing a broader range of counter-measures against Washington and could escalate trade tensions. “If we see that 30% (US) tariff implemented, followed by potential countermeasures from the European Union, it would significantly hurt the growth outlook for the eurozone—a region where growth is already in a very fragile position,” Fiona Cincotta, senior market analyst at City Index said.
Top on the radar for investors is a business activity survey and the European Central Bank’s monetary policy verdict later in the week. Markets broadly anticipate that the central bank would leave interest rates unchanged.