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U.S. Markets

European stocks fall as healthcare, construction sectors drag

(Reuters) - European shares fell for a third straight session on Wednesday, as losses in healthcare and construction stocks countered a lift from encouraging earnings from consumer giant Nestle and telecoms equipment maker Ericsson.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, October 15, 2020. REUTERS/Staff

The pan-European STOXX 600 .STOXX fell 1.3% to close at its lowest in more than two weeks.[.N]

Losses were broad-based with only the basic material sector .SXPP in the green, supported by rising copper prices. [MET/L]

Nestle NESN.S lifted its 2020 sales forecast following a quarterly beat, but shares inched lower after early gains.

Sweden's Ericsson ERICb.ST jumped 9.6% as higher margins and China's 5G rollout helped the company beat quarterly core earnings estimates.

“Earnings have been generally well above expectations, and guidance has been a positive surprise,” said Patrick Moonen, principal strategist in the multi-asset team at NN Investment Partners.

“But there are other elements that are currently at play and may have a bigger impact on the market performance than earnings,” he said, pointing to many European countries reimposing mobility restrictions following a surge in COVID-19 cases that could weigh on fourth-quarter economic activity.

The STOXX 600 has struggled to break out of a trading range since June, when it recouped a large part of the early pandemic-driven losses. The benchmark is still about 16% below its all-time high.

Capital Economics expects the new containment measures to cause the euro-zone economy to stagnate over the next six months, resulting in only a slight increase in GDP on a quarter-on-quarter basis in the fourth quarter and zero growth in the first quarter of next year.

London's exporter-heavy FTSE 100 .FTSE underperformed, marking its worst session in a month, hit by a surge in pound after bullish Brexit comments. [.L]

Vivendi VIV.PA rose 1.6% after the French media group reported a bigger-than-expected quarterly sales and unveiled plans to list its most-prized asset, Universal Music Group, in 2022.

Third-quarter profits for companies on the STOXX 600 are expected to drop 34.8%, according to Refinitiv data, a slight improvement from the 36.7% predicted at the start of the earnings season.

Of the 29 companies that reported so far, 75.9% have topped earnings expectations.

Gold miner Centamin Plc CEY.L slumped 19% to the bottom of STOXX 600 after cutting its 2020 production forecast.

Construction companies also took a knocking, with Assa Abloy ASSAb.ST, the world's biggest lockmaker, falling 4.1% after it reported a drop in quarterly sales.

Reporting by Sruthi Shankar in Bengaluru; Editing by Sriraj Kalluvila and Lisa Shumaker

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