European stocks were largely flat on Wednesday as investors parsed through a deluge of earnings reports from major lenders like Deutsche Bank and Barclays, while waiting to hear from the U.S. Federal Reserve.
The pan-European STOXX 600 edged up 0.1 per cent as a 1.3 per cent jump in retailers .SXRP helped counter the declines in automakers and chemical companies.
Earnings triggered big swings in regional markets, with France’s CAC 40 rising 0.8 per cent after electrical equipment group Schneider Electric SE confirmed its medium-term goals, sending its shares up 4.3 per cent.
French luxury group Kering gained 4.9 per cent after reporting a smaller-than-expected decline in quarterly sales.
Meanwhile, chemicals giant BASF SE fell 4.7 per cent after saying it still could not provide an outlook for full-year sales and earnings due to the uncertainty over the economic fallout from the pandemic.
“Markets have rallied aggressively, so what we’re seeing is companies coming with better numbers but not seeing an additional uptick in markets,” said Will James, deputy head of European equities at Aberdeen Standard Investments.
“Companies that have managed earnings and sales, there have been aggressive cost measures put in place.”
Profits for STOXX 600 companies are expected to drop by a record 59 per cent in the second quarter, according to Refinitiv data. But with much of the decline priced in, European stocks are on course to end July with gains as they bet on more stimulus.
The Fed concludes its two-day meeting later on Wednesday, and investors are hoping for interest rates to stay lower for a longer period to support financial markets in the wake of the pandemic.
German lender Deutsche Bank AG rose 0.4 per cent, while Britain’s Barclays Plc fell 3.2 per cent as they set aside more funds to protect for potential loan losses as the COVID-19 pandemic takes its toll, but both showed improvement at the investment bank.
Further weighing on the banks .SX7P, Spain’s Santander slid 3.7 per cent as it reported a record net loss of 11.1 billion euros ($13 billion) in the second quarter.
UK retailer Next jumped 7.1 per cent after its full-price sales in the second quarter declined by a 28 per cent, a much better result than it expected at the peak of the pandemic.
