European stocks flat as commodity shares offset earnings jitters

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, October 8, 2021. REUTERS/Staff

  • Rate talks lift banks
  • Commodity shares shine
  • ASOS slumps on profit warning

Oct 11 (Reuters) – European stocks kicked off the week slightly lower on Monday as nerves around inflation and the upcoming earnings season offset surging commodity prices that supported oil and mining shares.

The pan-European STOXX 600 index (.STOXX) slipped 0.4% in morning trading, with travel & leisure (.SXTP) and real estate stocks (.SX86P) the biggest decliners.

“There is still real concern about stagflation, with indications that prices are going to not be as transitory as central bankers first thought,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“It’s acting as a drag on the economic recovery.”

Brent crude jumped almost 2% as an energy crisis gripping major economies showed no sign of easing, while Dalian coking coal scaled a contract high after a recent flooding in China’s top coal-producing Shanxi province intensified supply fears.

Miners (.SXPP) jumped 2.2% to lead gains among sectors, while oil & gas stocks (.SXEP) added 0.8%.

While a heavy presence of commodity-related companies in European bourses helped limit losses, investors generally were anxious about rising raw material prices hurting corporate profits heading into the earnings season.

U.S. banks will kick off the reporting season on Wednesday, with investors anticipating a moderation in profit growth in third quarter compared with a surge in the previous quarter. Third-quarter profit growth is estimated to be up 29.6% for U.S. companies and 45.6% for European firms, according to Refinitiv IBES data, according to Refinitiv IBES data.

The banking index (.SX7P) touched its highest since February 2020, recovering almost all of its pandemic-induced losses as investors jacked up interest rate expectations. Money markets are fully pricing in a 10 basis-point rate hike from the European Central Bank by the end of next year.

British banks HSBC (HSBA.L), Lloyds Banking Group (LLOY.L), Barclays (BARC.L) and Natwest Group (NWG.L) all rose about 1% after hawkish comments from Bank of England officials drove traders to ramp up bets of a November interest rate increase. read more

Rate talks, economic recovery help banks recoup almost all of pandemic-related losses

Among stocks, British online fashion retailer ASOS (ASOS.L) tumbled 9.8% after it warned that higher logistics costs and supply chain disruption could force 2022 profits to drop by more than 40% and said Chief Executive Nick Beighton will step down. read more

German real estate investor Adler Group (ADJ.DE) slipped 0.6% after it agreed to sell residential and commercial property worth 1.49 billion euros ($1.73 billion) to rival LEG Immobilien (LEGn.DE).

Reporting by Sruthi Shankar and Anisha Sircar in Bengaluru; Editing by Sriraj Kalluvila

Our Standards: The Thomson Reuters Trust Principles.

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