European shares fall on mixed earnings, luxury firms drag

By Amruta Khandekar

(Reuters) -European shares fell on Wednesday, weighed by declines in the luxury sector after downbeat sales from Kering (EPA:), while investors also digested a slew of other mixed earnings reports amid worries about slowing growth in the euro zone.

The pan-European index fell 0.3% by 8:54 GMT.

Shares of Kering fell 3.5% to their lowest since early 2020 as the French luxury group posted a bigger-than-expected drop in third-quarter sales on slowing demand for high-end clothes and accessories.

The dismal results also dragged rivals LVMH, Richemont and Pernod Ricard (EPA:) down between 0.9% and 1.8%, pushing the broader personal and household goods index down 0.6%.

Among other major companies reporting earnings, shares of Deutsche Bank climbed 6.9% after the lender’s third-quarter revenue beat expectations.

Europe has seen a mixed start to the earnings season, with 54% of the 50 STOXX 600 companies that have reported profits so far beating estimates, according to LSEG data. Analysts expect third-quarter earnings to drop 9.7% from a year earlier.

Recent evidence of slowing business activity in the euro zone and a spike in energy prices due to tensions in the Middle East compounded worries about a hit to corporate profits.

“Sentiment in Europe is very weak at the moment. There is firm evidence that the transmission of monetary policy is feeding through to the economy,” said Shaan Raithatha, senior economist at Vanguard Europe.

“So we have a relatively weak growth outlook.”

Investors also digested earnings reports from megacap tech firms in the United States.

The Frankfurt-listed shares of Alphabet (NASDAQ:) fell 6.4% after the Google owner’s cloud revenue missed estimates, while Microsoft (NASDAQ:) added 3.4% following a beat in quarterly sales estimates.

Dettol maker Reckitt’s shares fell 4.0% as its third-quarter like-for-like sales missed expectations.

Real estate stocks led sectoral declines, with a 1.5% fall, while miners outshined, rising 1.3% as metal prices gained after China’s decision to roll out fresh stimulus measures.

On the upside, shares of ASM International (AS:) rose 6.3% after the semiconductor firm beat its third-quarter revenue guidance, while French software maker Dassault Systemes climbed 6.0% after raising its full-year profit target.

Worldline shares fell to an all-time low, last down 55.7% after the French payment company cut its annual targets.

Data showed German business morale improved more than expected in October.