European shares drop on disappointing earnings and Fed fears

Iseq down 0.5% as travel and leisure names weaken

European shares declined on Wednesday as a result of some disappointing corporate earnings reports and investor jitters ahead of an expected rate hike announcement by the US Federal Reserve.

The pan-European Stoxx 600 index dropped 1.1 per cent, and most regional indexes were also in negative territory.

DUBLIN

The Iseq index ended the session down 0.5 per cent at 7,274.38, with travel and leisure-related stocks among the main decliners. Ryanair lost 3.5 per cent to €14.15, while Dalata Hotel Group fell by 3.4 per cent to €4.32.

Bucking the trend, Paddy Power owner Flutter Entertainment jumped 4.9 per cent to €103.25 after it reported that its revenue expanded by 6 per cent in the first three months of the year, thanks to strong growth in the US.

Bank of Ireland stood out as a weak spot among financial stocks, declining 1.1 per cent to €5.74.

LONDON

UK’s benchmark equities index declined, weighed by weakness in consumer staple and healthcare shares, while investors awaited the Federal Reserve’s interest rate decision later in the day.

The blue-chip FTSE 100 index closed 0.9 per cent lower, with drugmaker Astrazeneca, GSK and cyclical names such as Diageo, Unilever among the top drags.

Rio Tinto and Anglo American declined after a ratings cut from Liberum weighed on the mining sector, pulling it down 1.6 per cent.

Oil majors Shell and BP rose nearly 0.5 per cent each as crude prices bounced after the European Union, the world's largest trading bloc, spelled out plans to phase out imports of Russian oil, which offset worries about demand in top crude importer China.

Online fashion retailer Boohoo dropped 12.4 per cent, as it reported a 28 per cent fall in annual core earnings and warned that pandemic-related external factors would continue to affect it this year.

Aston Martin Lagonda rose 6.7 per cent after the luxury carmaker named Amedeo Felisa, the former boss of Ferrari, as its new chief executive officer.

EUROPE

Pandora slipped 2.1 per cent after the Danish jewellery maker flagged increased uncertainty around its full-year earnings forecast.

Swedish builder Skanska plunged 9.8 per cent after it posted a drop in profit and braced for potential project cancellations in its Eastern European markets as an indirect effect of the war in Ukraine.

However, Norwegian energy group Equinor gained 3.1 per cent as the company reported a record quarterly pretax profit after the Ukraine conflict triggered an energy supply crunch that sent natural gas prices soaring to all-time highs.

NEW YORK

Wall Street’s main stocks indexes were lower in early afternoon trading, dragged down by growth stocks ahead of a widely expected interest-rate hike.

Still, bank stocks were up generally higher after US Treasury two-year yields, the most sensitive to the Federal Reserve’s interest rate outlook, soared to their highest since November 2018. Rising interest rates tend to boost banks’ lending margins.

Strengthening yields continued to haunt megacap growth stocks. Microsoft, Google-parent Alphabet, Meta Platforms, Tesla, Amazon and Nvidia were all in negative territory.

Two separate sets of data showed private employers hired the fewest workers in two years last month, while expansion in the services sector unexpectedly lost some momentum in April.

Concerns about a hit to economic growth due to a hawkish Fed, mixed earnings from some big growth companies, the conflict in Ukraine and pandemic-related lockdowns in China have hammered Wall Street recently, with richly valued growth stocks bearing the brunt of the sell-off.

Starbucks gained 5.5 per cent after the coffee chain saw quarterly comparable sales grow 12 per cent in North America. Livent Corp surged 21.2 per cent after it posted a better-than-expected quarterly profit and bolstered its 2022 revenue outlook on higher demand for lithium used in electric vehicle batteries. – Additional reporting, Reuters

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