European stocks edge higher as strong earnings offset Fed rate-hike fears
Key Takeaways
- •The STOXX 600 rose 0.1% in early trading, while major European indexes moved only modestly in either direction.
- •Standard Chartered raised its full-year income targets after beating earnings expectations, and UBS and CaixaBank also reported results above forecasts.
- •Kering, EssilorLuxottica and Rio Tinto each posted stronger-than-expected results, while GSK lifted its margin outlook and unveiled a $2.5 billion restructuring plan.
- •Brent crude climbed more than 3% after renewed regional security concerns, adding to inflation worries and keeping risk sentiment cautious.
- •European technology shares fell as investors reacted to weakness in Asian semiconductors and concerns over high AI valuations ahead of major U.S. earnings releases.
European shares were broadly flat on Wednesday as a wave of strong earnings from banking, luxury and mining companies offset rising geopolitical tensions in the Middle East, a 3% jump in oil prices and a deepening sell-off in global technology stocks.
The pan-European STOXX 600 index rose 0.1% in early trade.
Germany’s DAX gained 0.2%, France’s CAC 40 advanced 0.3%, London’s FTSE 100 added 0.4% and Spain’s IBEX 35 was unchanged.
In banking, Standard Chartered raised its full-year income targets after a surge in wealth management helped it beat earnings expectations, sending its shares up 3%. UBS also beat second-quarter net profit forecasts, while Spain’s CaixaBank topped quarterly earnings estimates.
In luxury and consumer goods, Kering climbed 9% after its flagship brand Gucci reported a smaller-than-expected decline in quarterly sales. EssilorLuxottica, the eyewear group, beat first-half profit estimates and rose 2.2%.
Mining group Rio Tinto posted its highest first-half earnings in four years, lifting its shares 2.5%. Healthcare company GSK raised its full-year margin outlook and announced plans for a $2.5 billion restructuring program.
Even so, strong corporate balance sheets were not enough to fully protect European indexes from broader market pressures, highlighting how closely region-wide moves remained tied to rates and energy headlines as investors digested a busy earnings slate. Fixed-income markets remained under visible strain, with elevated sovereign bond yields reflecting investor caution ahead of the Federal Reserve’s policy decision later in the day.
The Fed is widely expected to leave benchmark interest rates unchanged, but money markets are pricing in roughly a one-in-three chance of an unexpected rate hike or hawkish forward guidance, driven by persistent inflation concerns, fresh trade tariffs and higher energy prices.
Sentiment weakened overnight after joint U.S. and Saudi airstrikes targeted Iran-backed groups in Iraq that were blamed for recent drone attacks on Saudi oil facilities.
Tehran said that attributing the attacks to Iran was a "major miscalculation," adding to the risk-off mood. Brent crude rose more than 3% after Iranian ballistic missile launches were intercepted in regional airspace, renewing concerns about prolonged supply disruptions and sticky energy inflation.
European technology stocks also fell, tracking a sharper sell-off in Asia after SK Hynix reported quarterly operating profit that missed expectations. The disappointment from the artificial intelligence memory supplier revived concerns about elevated AI valuations, rising capital expenditure plans and whether technology companies can continue to beat already high market expectations by wide margins.
The semiconductor weakness came at a sensitive moment for global equities, with Microsoft and Meta Platforms scheduled to report quarterly results later in the day.
Geopolitical risks and technology-sector jitters weighed on an unusually busy slate of major corporate earnings across Europe.
Source: Investing.com