Stocks in Europe took a hit on Thursday, with eyes on US economic data due out this afternoon and on Friday.
The FTSE 100 index traded down 59.21 points, or 0.7%, at 8,094.48. The FTSE 250 was down 224.81 points, 1.1%, at 20,726.03, while the AIM All-Share fell 7.50 points, 1.0%, at 769.14.
The Cboe UK 100 was down 0.7% at 807.67, the Cboe UK 250 dropped 1.2% to 18,129.36, and the Cboe Small Companies plunged 1.6% to 16,945.16.
The CAC 40 in Paris slumped 2.2%, while Frankfurt’s DAX 40 traded 1.4% lower. The CAC 40 sat at around 7,347.08, putting it around 10% below its May 15 closing peak. Should it close at this current level, it will technically be in correction territory.
In New York, the Dow Jones Industrial Average is called to open 0.1% lower, the S&P 500 down 0.3% and the Nasdaq Composite down 0.5%. The benchmarks had tumbled on Wednesday.
Shares in Europe fell under the weight of poorly-received earnings. There were guidance cuts, profit falls and sales declines for investors to contend with. But even those that managed to improve their top- and bottom-lines and up guidance struggled too, suggesting the bar is high during this corporate earnings season.
One stock that fell victim to good not being ‘good enough’, XTB analyst Kathleen Brooks said, was AstraZeneca.
‘The market is scrutinizing earnings reports and punishing pockets of weakness,’ Brooks added, as the analyst said higher than expected costs may have been behind the 3.3% fall in the company’s shares.
The Cambridge-based pharmaceutical firm said total revenue in the first half of 2024 surged 15% to $25.62 billion from $22.30 billion. Pretax profit jumped 19% to $5.29 billion from $4.35 billion.
For the second-quarter alone, revenue climbed 13% $12.94 billion, and pretax profit was 15% higher at $2.40 billion.
Looking to the full-year, the pharmaceutical firm now expects total revenue and core EPS to grow by a ‘mid teens percentage’ at constant currency, its view upgraded from a previously expected ‘low double-digit to low teens rise’.
Besides AstraZeneca, the pharmaceutical sector was a space that was somewhat spared from Thursday’s sell-off. Sanofi rose 4.1% in Paris and Roche up 2.3% in Zurich, rare bits of green among the shares of European blue-chips that reported earnings on Thursday morning.
The automotive sector suffered, with Fiat owner Stellantis tumbling 8.8% after a first-half that it admitted ‘fell short’.
A poor period for luxury retail continued, with this time Gucci owner Kering at the heart of the sell-off, down 7.3% in Paris, while even the music sector provided a bum note, as Universal Music Group plunged 26% in Amsterdam after its earnings.
UMG dragged London-listed Pershing Square Holdings down with it. The firm, managed by Bill Ackman’s Pershing Square Capital Management, is a UMG investor.
Consumer goods firm Unilever and tobacco company BAT provided bright spots for the FTSE 100, up 6.6% and 4.6%.
Unilever upped its margin target. It now expects its full-year underlying operating margin ‘to be at least 18%’. It had previously predicted a ‘modest improvement’ from the 16.7% achieved in 2023.
BAT said its first-half performance for 2024 was in line with its expectations, and indicated that it is on track to deliver its full-year guidance.
The London-based cigarette and vaping products maker reported a 5.7% rise in pretax profit to £5.60 billion for the first half of 2024 from £5.30 billion a year earlier, boosted by profit from ‘associates and joint ventures’.
But revenue fell 8.2% to £12.34 billion from £13.44 billion, driven by the sale of businesses in Russia and Belarus in September 2023, and currency headwinds.
For 2024, the company guides for low-single figure organic constant currency revenue growth and also low-single figure organic adjusted profit from operations growth.
Elsewhere in London, banknote printer De La Rue plunged 15%, as the reference to a ‘material uncertainty’ overshadowed its annual results.
Revenue in the year to March 25 fell 11% to £310.3 million from £349.7 million. Its pretax loss, however, slimmed to £15.4 million from £29.6 million.
Looking ahead, it warned that its current cash flow forecasts suggest it will not have enough in its coffers to repay a revolving credit facility by the start of next July.
‘Various strategic options are being pursued which would allow the group to repay the RCF on or before 1 July 2025. The most progressed of those is the sale of the Authentication division. The board notes that the probability of completion, timing and terms of the sale of the division are subject to factors outside of the board’s control, which may in turn impact the cash proceeds, the costs associated with the transaction and the amounts required to address any pension scheme risk, along with the day one liquidity of the retained operations of the group. These matters represent a material uncertainty which may cast significant doubt upon the group’s ability and the company’s ability to continue as a going concern for a period up to 28 September 2025,’ De La Rue cautioned.
Brent oil was quoted at $80.43 a barrel early on Thursday afternoon, falling from $81.75 at the time of the London equities close Wednesday. Gold was quoted at $2,378.13 an ounce, down from $2,426.06.
Still to come on Thursday is a US gross domestic product reading and a quarterly personal consumption expenditures reading at 1330 BST. The latest monthly PCE gauge is due on Friday, amid a backdrop of dwindling Federal Reserve interest rate expectations.
ING analysts commented: ‘The focus will be on the second quarter GDP figure. This is expected to rise to 2.0% quarter-on-quarter annualised from 1.4% in the first quarter. More interest might be had in the second quarter core PCE price data. From this investors will be able to calculate tomorrow’s release of the June core PCE number. That number is widely expected at 0.2% month-on-month, consistent with the Fed’s 2% inflation target. Confirmation of such a number could see the short end of the US yield curve drop further as the market shifts to pricing in three rate cuts this year. Currently, the market fully prices a 25bp Fed cut in September and 63bp of cuts in total for this year.’
The pound was quoted at $1.2872 early on Thursday afternoon, down from $1.2926 at the time of the London equities close Wednesday. The euro stood at $1.0850, fading from $1.0857. Against the yen, the dollar was trading at JP¥152.23, down from JP¥153.44.
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