Lacklustre earnings nudge European shares lower; L'Oreal, Hermes decline

Reuters
10/22
UPDATE 2-Lacklustre earnings nudge European shares lower; L'Oreal, Hermes decline

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Semiconductor stocks slip after Texas Instrument's results

Earnings from L'Oreal, Hermes fail to impress investors

Barclays gains after unveiling $670 million buyback

London's FTSE 100 outshines peers after inflation data

Updates after markets close

By Sukriti Gupta and Purvi Agarwal

Oct 22 (Reuters) - European shares nudged lower on Wednesday, after two sessions of gains, as a flurry of lacklustre earnings from major firms including French cosmetics giant L'Oreal and Birkin bag maker Hermes weighed on investor sentiment.

The continent-wide STOXX 600 index .STOXX closed 0.2% lower. Major regional indexes were mixed with Germany's DAX .GDAXI down 0.7% while Spain's IBEX .IBEX edged 0.1% higher.

Technology stocks .SX8P dragged heavily on the European benchmark index, down 1.4%. Semiconductor-linked stocks including ASM International ASMI.AS, ASML ASML.AS and STMicroelectronics STMMI.MI dipped after a dour quarterly update from U.S. peer Texas Instruments TXN.O.

L'Oreal OREP.PA fell 6.7% after the company reported weaker-than-expected third-quarter sales, and Hermes HRMS.PA lost 2.3% after its outlook for a slight improvement in key market China failed to excite investors.

Both stocks weighed on the personal and household goods sector .SX8P, while the broader luxury index .STXLUXP declined 1.2%.

Mabrouk Chetouane, head of global markets strategy at Natixis Investment Managers, said the earnings reports from the luxury sector were "clearly flagging the fact that the recovery in China is still struggling".

On the flip side, energy stocks .SXEP were the biggest boost to the market, up 0.7%, tracking a 2% gain in oil prices.

London's FTSE 100 .FTSE outperformed peers with a 0.9% rise after data showed British inflation and a key underlying measure of price growth both unexpectedly held steady in September.

It raised expectations for an interest rate cut from the Bank of England before the end of this year. Most British homebuilders and real estate stocks rose, among the biggest gainers on the STOXX 600.

Defence companies, which rose earlier on news that a planned summit between U.S. President Donald Trump and his Russian counterpart was put on hold, pared gains and the wider index .SXPARO reversed course to close 1.1% lower.

"The delay tempers optimism about a potential Ukraine peace framework, contributing to the (already) cautious tone," said David Morrison, senior market analyst at Trade Nation.

Next week's monetary policy decisions by the European Central Bank and U.S. Federal Reserve will be on the radar, amid a U.S. government shutdown at a time when markets are focused on employment data to gauge the monetary policy path of the Fed.

In other moves, ITV ITV.L plunged 8.6% to the bottom of the STOXX 600 after the broadcaster's largest shareholder, Liberty Global LBTYA.O, halved its stake to about 5%.

Barclays BARC.L rose nearly 5% after the lender announced a surprise 500-million-pound ($671 million) share buyback plan and upgraded its performance target for the year.

UniCredit CRDI.MI fell 2.3% after the bank reported third-quarter results, but said it is aiming to improve its profit outlook.

Ipsen IPN.PA rose 5.3% after the French biopharma company reported better-than-expected third-quarter results and upgraded its outlook.

(Reporting by Sukriti Gupta and Purvi Agarwal in Bengaluru; editing by Saumyadeb Chakrabarty and Mark Heinrich)

((Sukriti.Gupta@thomsonreuters.com;))

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