Earnings drive big swings in European stocks

Investors await Fed, US fiscal stimulus update

Europe's main stocks benchmark closed nearly flat on Wednesday, as investors waited to hear from the US Federal Reserve, but a flurry of earnings reports drove big swings in individual stocks. When the Fed concludes its monetary policy meeting later in the day, investors are hoping that policymakers will reiterate their accommodative stance to support financial markets as the coronavirus pandemic takes its toll.

In a busy earnings day, the pan-European Stoxx 600 closed down 0.1 per cent, with healthcare and banks dragging on the main index, while retailers jumped 1.4 per cent.


The Iseq traded broadly flat on the day. Bank of Ireland, however, bucked the downward trend in financials, rising 1.5 per cent to €1.87 but AIB fell nearly 3 per cent to €1.15. Ryanair, which this week reported a 95 per cent drop in revenue between April and June, was down 2.3 per cent at €10.93. The airline is hoping the airways will reopen fully in the coming months but renewed flare-ups of the coronavirus is making that seem unlikely. Swiss-Irish baked goods specialist Aryzta was up nearly 5 per cent at 54 cent amid heightened speculation it will be in receipt of a takeover bid in the coming days. Paddy Power Betfair owner Flutter Entertainment was also up at €128.20 amid a resumption in sporting events.



The FTSE 100 ended flat on Wednesday as investors held out for more stimulus from the US Congress and the Federal Reserve, while GlaxoSmithKline, Barclays and Taylor Wimpey slid on weak quarterly earnings. The world's largest vaccine maker, GSK, slumped 3.2 per cent to hit a 15-week low after missing second-quarter profit estimates under the effect of coronavirus lockdowns, dragging the healthcare index down 1.8 per cent. Kicking off the quarterly earnings season for UK banks, Barclays set aside a higher-than-expected £1.6 billion to cover a possible rise in loan losses due to the Covid-19 pandemic. Its shares fell 6.1 per cent. But a 7.7 per cent jump for Next helped the blue-chip FTSE 100 end in positive territory as the retailer reported a smaller-than-feared slump in second-quarter sales. The mid-cap FTSE 250 was off 0.2 per cent, weighed by losses in consumer discretionary, financial and tech-related stocks. Homebuilder Taylor Wimpey shed 8.1 per cent saying it expected to complete about 40 per cent fewer homes in 2020.


France's CAC 40 outperformed its continental peers with a 0.6 per cent rise after positive earnings updates from luxury group Kering, electrical equipment group Schneider Electric and consulting firm Capgemini. "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. Euro zone banks took a beating as Deutsche Bank fell 2.5 per cent after giving a slightly improved outlook for the year, but chief executive Christian Sewing damped speculation that the lender was eager to revive merger talks with Commerzbank. Spain's Santander slid 4.7 per cent as it reported a record net loss of €11.1 billion in the second quarter.


US stocks rose on Wednesday as a slew of positive earnings updates and hopes for assurances of continued support from the Federal Reserve overshadowed concerns about next steps for the government's coronavirus relief plan. Advanced Micro Devices jumped 12.4 per cent after the chipmaker raised its full-year revenue forecast. Its shares were among the top boosts to the S&P 500 and Nasdaq. The Philadelphia chip index rose 1.8 per cent. Starbucks climbed 4.1 per cent after the coffee chain said business was "steadily recovering" worldwide and it would return to profitability in the current quarter. Boeing slipped 3.1 per cent as it slashed production on its widebody programs and reported a bigger-than-expected loss due to the fallout from the pandemic. General Electric fell 4.7 per cent as it reported a wider-than-expected loss in the second quarter, but saw less cash outflow than estimated. The chief executives of Amazon, Facebook, Apple and Alphabet's Google are set to face a congressional hearing on antitrust on Wednesday, marking the first time appearing before lawmakers together. All four companies are set to report results on Thursday. – Additional reporting by Reuters

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times