Europe

European stocks hit 6-week highs as Nestle shines in mixed bag of earnings

3 minute read

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

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  • STOXX 600 up 0.3%, oil stocks track crude higher
  • Kering slides as Gucci sales lose sparkle
  • Nestle's 2.7% jump boosts food & beverage stocks
  • Recovery in euro area has further to run - TS Lombard

Oct 20 (Reuters) - European shares closed at six-week highs on Wednesday as strong results from Nestle boosted food company stocks, helping outweigh losses after a clutch of disappointing earnings including luxury group Kering and chipmaker ASML.

The pan-European STOXX 600 index (.STOXX) ended 0.3% higher, with oil stocks (.SXEP) also aiding gains as crude prices recovered slightly.

Swiss food giant Nestle (NESN.S) gained 2.7% on an upbeat sales outlook after strong coffee sales and price hikes pushed organic sales 6.5% higher in the third quarter. read more

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Europe's food and beverage index (.SX3P) rose 1.7%, with Anglo-Dutch rival Unilever (ULVR.L), which is due to give a trading update on Thursday, up 0.8%. The sector had dipped last session after downbeat results from Danone (DANO.PA).

As the third-quarter earnings season unfolds, investors are fretting about the impact of higher costs, stemming from supply-chain problems and labour shortfalls, especially when central banks across the globe are planning to withdraw their stimulus measures. read more

"The bar (for earnings) that was set early this year is too high. It's going to be hard to beat that," said Anna Stupnytska, global macro economist at Fidelity International.

Kering (PRTP.PA) tumbled 0.6% as sales growth at its star fashion brand Gucci missed analysts' expectations due to a sharp slowdown in its pace of recovery, particularly in Asia. read more

TS Lombard said it downgraded German and French equities as the heavy presence of automotive and luxury companies leaves them vulnerable to a slowdown in China, but still holds out hope for the broader region.

"Growth headwinds are mounting, but we believe that the recovery in the euro area has further to run," it said.

ASML Holdings (ASML.AS), a key supplier to computer chip makers, fell almost 4% after its fourth-quarter sales forecast fell short of some analysts' estimates. read more

Drugmaker Roche (ROG.S) beat revenue expectations and raised its 2021 sales forecast amid pandemic-driven demand. But its shares were down 1.6%.

Dutch paints and coatings maker Akzo Nobel (AKZO.AS) slipped 1.3% as its quarterly earnings were hit by continued raw material inflation and supply chain disruptions, which it expects to continue through mid-2022.

Europe Inc earnings are expected to have risen 47.6% to 96.1 billion euros ($112 billion) in the third quarter, latest data from Refinitiv I/B/E/S showed, only a slight improvement from last week's 46.7% growth forecast. read more

Miner Rio Tinto (RIO.L) slipped 3.3% as investors worried about spending after it announced a $7.5 billion plan to reduce carbon emissions. read more

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Reporting by Anisha Sircar in Bengaluru; editing by Uttaresh.V, Anil D'Silva and Ed Osmond

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