By Avinash P
Oct 23 (Reuters) – European stocks edged lower on Friday, on track for a weekly decline, as losses in Kering and caution surrounding political uncertainty in France and the Middle East war overrode a slate of largely strong earnings.
The pan-European STOXX 600 index was down 0.23% at 636.27 points by 0840 GMT, after logging its biggest one-day drop in three weeks on Thursday. For the week, the benchmark is down more than 1%.
Kering dropped 11.2% after third-quarter sales at its flagship Gucci brand fell as the Middle East war along with China’s tax crackdown on the wealthy piled pressure on the world’s biggest luxury conglomerates.
The luxury sector, the worst-performing European sector so far this year, fell 1.6%.
“The European luxury sector continues to suffer from the Middle East war and China’s weakened appetite for luxury,” said Ipek Ozkardeskaya, senior analyst at Swissquote.
Overall earnings estimates have improved for European companies.
Third-quarter earnings for STOXX 600 companies are expected to grow at 21.9%, the second-best growth rate in the past four years and up from 20.7% last week, mostly driven by energy firms, according to LSEG I/B/E/S data.
FRANCE WEEKEND SHUTDOWN
However, a surge in oil prices, a drag on oil-import-dependent Europe, tumbling AI stocks and concerns over social unrest in France have overshadowed earnings optimism.
Businesses, cultural events and museums planned to close at the weekend despite curbs on demonstrations as French President Emmanuel Macron seeks to restore order a week after nationwide protests turned violent.
Against this backdrop, investors will closely scrutinise Moody’s decision on France’s credit rating, due later in the day.
“The French turmoil has not yet turned into a full-blown European debt crisis. Still, spreads should be watched closely as street unrest echoes across other European nations,” Ozkardeskaya said.
Oil prices climbed more than 1%, with Brent crude trading at multi-month highs after Houthi attacks in Saudi Arabia stoked concerns of further disruption to energy supplies from the Middle East.[O/R]
The European Central Bank is scheduled to meet next week, with investors pricing in more than a 90% probability that it holds interest rates steady.
The ECB has hiked interest rates twice this year to arrest price pressures stemming from elevated oil prices.
Among other stocks, Holcim gained 5.5% after the Swiss cement maker raised its full-year earnings forecast, while French food caterer Sodexo rose 5.5% after reporting stronger-than-expected full-year revenue.
Volvo Cars slumped over 27% to a record low after reporting a bigger-than-expected third-quarter operating loss and said it would cut a further 2,500 jobs.
L’Oreal climbed 4% after the French cosmetics group beat third-quarter sales forecasts.
Results from oil majors BP and Shell are due next week.
(Reporting by Avinash P in Bengaluru; Editing by Janane Venkatraman and Harikrishnan Nair)
