BLBG: European Stocks Are Little Changed as Investors Assess Earnings
Ericsson posts worse-than-expected third-quarter profit, sales
Energy producers advance as crude gains after Tuesday’s slide
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European stocks were little changed as investors assessed earnings releases for signs of growth against the backdrop of an expected tightening of U.S. monetary policy.
Ericsson AB paced technology shares to the worst performance on the Stoxx Europe 600 Index, sinking 17 percent, the most in nine years, after reporting a slump in third-quarter sales and profitability. Finnish peer Nokia Oyj, which also owns Alcatel-Lucent SA in France, dropped 4.6 percent. Glencore Plc led commodity producers to the biggest gains on the European equity benchmark as metals prices climbed.
The Stoxx 600 gained less than 0.1 percent to 340.24 at 1 p.m. in London. The U.K.’s FTSE 100 Index, which touched an intraday record on Tuesday, fell 0.1 percent today as the pound rebounded.
“Everyone is looking at what’s still coming up in 2016, not wanting to take a huge amount of risk and preserving as much capital as possible,” said Alan Higgins, chief investment officer at Coutts & Co. in London. His firm oversees the equivalent of $18 billion. “The market will need some reassurance that a soft start to earnings season has been nothing more than a few outliers. Investors are also building in a higher probability of a Fed hike as each week goes past. These next few months will be very busy.”
European stocks have had a rocky start to October, a month in which they have advanced in five of the past six years. Monday’s rebound on oil proved short lived, as concerns resurfaced about corporate earnings and whether the U.S. economy is sufficiently robust to cope with higher interest rates. Minutes from the Federal Reserve’s most recent decision, due after the European close today, will be parsed for indications of the possible trajectory of rates.
The Stoxx 600 fell in four of the past five weeks as traders boosted bets that the Fed will hike borrowing costs before the end of the year amid encouraging economic data. The odds of an increase in December stand at about 68 percent, up from about 50 percent two weeks ago. Concerns over how much central banks are willing to support economic growth were exacerbated last week by a report that European policy makers have held discussions on the best way to taper quantitative easing.
Fluctuating oil prices have also played a part in the Stoxx 600’s oscillations. Russia and OPEC are meeting in Istanbul today to discuss an output pact. Supply and demand will come back into balance earlier than expected if the group’s accord to trim output is implemented, the International Energy Agency said. Crude’s rebound today helped propel energy producers to among the biggest gainers on the Stoxx 600, with Total SA and BP Plc leading the advance.
Among other stocks moving on corporate news today, Lloyds Banking Group Plc fell 1.9 percent after a labor union said Britain’s largest mortgage lender plans to eliminate about 1,340 jobs as part of a cost-cutting program.
Fiat Chrysler Automobiles NV fell 1.6 percent after people familiar with the matter said that talks with Samsung Electronics about a partnership with the carmaker’s parts unit have stalled because the Korean company is focused on resolving the Galaxy Note 7 smartphone crisis.
