European stocks ease from peaks as Ryanair rises on traffic forecast

European stocks eased from all-time highs on Monday after regulatory concerns knocked Asian markets lower, while automakers retreated following a strong showing last week.

By 9.21am, the pan-European STOXX 600 index fell 0.6 per cent, set to snap a four-session rally.

Automakers led the losses, with Porsche down 5.3 per cent as it traded without entitlement for dividend, while French car parts maker Faurecia slipped 3.6per cent despite raising its 2021 net cash flow target.

Dutch technology investor Prosus NV, which has a 28.9 per cent stake in Tencent, tumbled 9 per cent to a more than one-year low after Beijing intensified its regulatory crackdown on the Chinese internet giant.

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"The current profit taking induced in part by pressure on China's tech is unlikely to last long as US stocks should again be bought on the dip," said Sebastien Galy, senior macro strategist at Nordea Asset Management.

Despite concerns about surging Covid-19 cases globally and rising inflation, the STOXX 600 hit a record high on Friday as strong earnings reports and dovish signs from the European Central Bank boosted appetite for risky equities.

Europe's largest low-cost carrier Ryanair rose 2.7 per cent as it nudged up its forecast for full-year traffic on strong summer bookings.

That helped the wider travel and leisure sector to be among the few sectoral gainers on Monday.

Analysts expect second-quarter profit at STOXX 600 companies to jump 115 per cent versus a year ago, as per Refinitiv IBES data. Out of nearly a third of STOXX 600 companies that have reported so far, 63 per cent have topped profit estimates.

"We continue to advocate a strong weighting towards Europe, " equity strategists at Jefferies wrote in a note.

“We expect European economic momentum to pick up running into 2022 accompanied by earnings growth ~67 per cent y-y for 2021 and ~22 per cent y-y for 2022 which should lift the STOXX 600 index to 500.”

Meanwhile, Ifo institute’s survey showed German business morale fell unexpectedly in July on continuing supply chain worries and amid rising coronavirus infections.

Banking stocks also took a beating as euro zone bond yields edged back to recent lows.

Spanish pharmaceuticals company Almirall fell 7.6 per cent after it posted a first-half net loss of €42.8 million. – Reuters