European stocks fell on Thursday, with a string of downbeat earnings weighing on sentiment as well as rising bond yields on further signs that major central banks will keep interest rates higher for longer.
The pan-European STOXX 600 closed down 0.9%, hitting its lowest in more than a month during the session.
Benchmark 10-year government bond yields rose across the eurozone, a day after minutes from the US Federal Reserve’s July meeting revealed a split over the need for further rate hikes .
“Tawny expectations for central banks to keep rates higher for longer have intensified, with some pricing on a September Fed hike after all…even the high UK wage growth figure this week fueled concerns about stickier-than-expected inflation that would be much harder to get on target,” said Andreas Bruckner, European equity strategist at Bank of America.
The industries index led the overall market decline, down 2.8%, led by a 39% plunge in Dutch payment processor Adyen NV, which missed first-half earnings estimates. The stock was the best laggard on the STOXX 600.
Technology, construction and materials as well as travel and leisure were other sector indexes that fell.
The luxury sector fell 1.9% to a near five-month low, with China-exposed LVMH and Hermes International each shedding more than 2% among major drags on the STOXX 600 amid lingering concerns regarding the outlook for Chinese demand.
“The issue of debt sustainability in China also weighs because Europe is more dependent on the global growth cycle because it has an open economy and is more China-oriented than other stock markets,” Bruckner added.
The benchmark STOXX 600 index, rattled by signs of slowing growth in China, has underperformed its US peers this year, with its 6.8% gain well below the 14.7% jump in the S&P 500 index.
In addition, Norway’s benchmark Oslo stock exchange fell 0.2% after the country’s central bank raised its benchmark rate by 25 basis points to 4%.
Danish hearing aid and audio solutions maker GN Store Nord fell 9.4% after missing the second-quarter sales estimate and slashing full-year forecasts, while Swedish pump maker Nibe heat lost 5.7% on second-quarter results that fell short of expectations.
European corporate profits in the second quarter are expected to fall 4.6% from a year earlier, slightly less than the 4.8% drop estimated last week, according to Refinitiv data released on Tuesday.
BAE Systems lost 4.7% after Britain’s largest defense firm announced it had agreed to buy Ball Corp’s aerospace assets.
Meanwhile, Swedish game developer Embracer topped the STOXX 600 with a 12.6% lead after reiterating its full-year guidance, saying its restructuring program was on track.
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