European shares retreated sligh-tly yesterday as a mixed batch of corporate earnings failed to offset concerns about the US-China trade conflict and subdued eurozone manufacturing growth.
Caution was also palpable ahead of the Federal Reserve’s decision, due yesterday after the European market close, with the US central bank expected to keep interest rates on hold before two hikes later this year.
The pan-European STOXX 600 ended the session down 0.5 per cent while Germany’s DAX also declined 0.5 per cent. France’s CAC 40 gave up early gains to close 0.2 per cent lower.
Auto stocks were the biggest sectoral fallers, down 2.4 per cent as shares in Schaeffler, Volkswagen and Porsche fell as much as 5.1 per cent. Shares in Ferrari dropped 8.4 per cent after the company’s CEO called their financial targets to 2022 “aspirational”.
The auto sector has been hit particularly hard by uncertainty over global trade and tariffs.
“The latest round of tough rhetoric from the US regarding its trading relationship with China has rattled investor confidence,” said David Madden, market analyst at CMC Markets UK.
Basic materials were also on the back foot, down 1.6 per cent as copper prices slid following reports that the United States may propose a higher, 25 per cent tariff on $200 billion worth of Chinese imports.
Rio Tinto added pressure on the sector as disappointing results sent its stock down 3.4 per cent despite news of an additional $1 billion share buy-back.
British airline services company’s BBA Aviation was another big faller, dropping 11.4 per cent after disappointing results.
On the upside, Air France-KLM rose more than four per cent after second-quarter results beat estimates despite recent strikes.
France’s BNP Paribas reported forecast-beating profits in the second quarter, though its shares gave up early gains to end 0.5 per cent lower.
“Q2 results don’t give a big trigger for a major rebound,” analysts at Jefferies said in a note, adding that they expected a better outcome in BNP Paribas’s French retail bank to be visible in the second half of 2018.
For the UK, Lloyds Banking shone, rising 1.7 per cent after reporting a 23 per cent jump in first-half pre-tax profit.
The positive trading update at tech giant Apple was not enough to help tech stocks, with that sector losing 0.4 per cent. After announcing an extraordinary dividend and supportive first-half results, Belgian Telenet Group jumped 6.6 per cent.