European markets muted as investors digest Fed decision, earnings


LONDON — European markets were mixed on Thursday as global investors digested a slew of corporate earnings and some slightly less hawkish messaging from the U.S. Federal Reserve.

The pan-European Stoxx 600 hovered 0.1% above the flatline by mid-morning, but major indexes in the U.K., Germany and France retreated. Basic resources climbed 3% while telecoms fell 1.6%.

The Fed on Wednesday implemented a widely expected second consecutive 75 basis point interest rate hike, as it seeks to reel in runaway inflation without tipping the slowing economy into recession.

Chairman Jerome Powell maintained a hawkish tone on curtailing inflation in a subsequent news conference, but the central bank dropped guidance on the scale of the next rate hike and acknowledged that “at some point” it will be appropriate to slow the pace of increases.

“While the market rallied Wednesday, we don’t think a sustained improvement in sentiment is likely until the Fed sees enough evidence of ebbing inflation to signal that an end to rate rises is in sight.”

Mark Haefele

CIO, UBS Global Wealth Management

“While the market rallied Wednesday, we don’t think a sustained improvement in sentiment is likely until the Fed sees enough evidence of ebbing inflation to signal that an end to rate rises is in sight,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

“While inflation is likely to decline in the coming months, it is likely to remain above central bank targets. Data stretching back to 1975 indicates that value sectors tend to outperform when inflation is above 3%, which we expect to be the case for some time to come. Furthermore, growth stocks are still expensive relative to value stocks.”

Earnings in focus

Earnings continue to drive individual share price movement in Europe, with a slew of major companies reporting before the bell on Thursday. They included Barclays, Shell, EDF, TotalEnergies, Stellantis, Leonardo, Prada, Diageo and BT.

Barclays saw a 48% slump in second-quarter profit after taking a substantial provision relating to a costly trading error in the U.S. The British bank reported a £1.071 billion ($1.30 billion) net profit attributable to shareholders, meeting expectations of £1.085 billion expected by analysts, according to Refinitiv.

Barclays shares slid 2.2% by mid-morning trade.

Oil giants Shell and TotalEnergies extended their share buybacks on Thursday after reporting record-breaking profits once again on the back of soaring oil and gas prices. The two companies plan to repurchase a combined $8 billion in shares in the third quarter.

Danish wind turbine manufacturer Vestas climbed 12.8% to lead the Stoxx 600, while French life insurer Scor fell more than 14% after swinging to a net loss in the first half of the year.

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