Earnings drive big swings in European stocks ahead of Fed

(Reuters) - Europe’s main stocks benchmark closed nearly flat on Wednesday, as investors waited to hear from the U.S. Federal Reserve, but a flurry of earnings reports drove big swings in individual stocks.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, July 28, 2020. REUTERS/Staff

When the Fed concludes its monetary policy meeting later in the day, investors are hoping that policymakers will reiterate their accommodative stance to support financial markets as the coronavirus pandemic takes its toll.

In a busy earnings day, the pan-European STOXX 600 .STOXX closed down 0.1%, with healthcare .SXDP and banks .SX7P dragging on the main index, while retailers .SXRP jumped 1.4%.

Drugmaker GlaxoSmithKline GSK.L fell 3.2% as it missed second-quarter profit estimates after lower sales of its existing vaccines, while lender Barclays BARC.L dropped 6.1% as it set aside a higher than expected 1.6 billion pounds ($2.1 billion) to cover a possible rise in loan losses due to the pandemic.

The pair helped keep London's FTSE 100 .FTSE nearly flat.

France's CAC 40 .FCHI outperformed its continental peers with a 0.6% rise after positive earnings updates from luxury group Kering PRTP.PA, electrical equipment group Schneider Electric SCHN.PA and consulting firm Capgemini CAPP.PA. [nL5N2F017R]

“Markets have rallied aggressively, so what we’re seeing is companies coming with better numbers but not seeing an additional uptick in markets,” said Will James, deputy head of European equities at Aberdeen Standard Investments.

“Companies that have managed earnings and sales, there have been aggressive cost measures put in place.”

Profits for STOXX 600 companies are expected to drop by a record 59% in the second quarter, according to Refinitiv data. But with much of the decline priced in, European stocks are on course to end July with gains as investors bet on more stimulus.

Euro zone banks .SX7E took a beating as Deutsche Bank DBKGn.DE fell 2.5% after giving a slightly improved outlook for the year, but chief executive Christian Sewing damped speculation that the lender was eager to revive merger talks with Commerzbank CBKG.DE.

Spain's Santander SAN.MC slid 4.7% as it reported a record net loss of 11.1 billion euros ($13 billion) in the second quarter.

Chemicals giant BASF SE BASFn.DE dropped 4.9% as it said its dividend policy and the value of assets on its balance sheet might be revised given uncertainty caused by the coronavirus crisis.

UK retailer Next NXT.L jumped 7.7% as it raised its profit forecast after sales fell less than feared over the past three months.

Reporting by Sruthi Shankar in Bengaluru; Editing by Bernard Orr and Uttaresh.V