European Stocks Steady With Earnings, Mideast Tensions in Focus

(Bloomberg) -- European stocks were steady ahead of a busy week for earnings. Investors remained cautious about the health of European economies and rising tensions in the Middle East. 

The Stoxx Europe 600 Index was up less than 0.1% as of 9:05 a.m. in London. Banks and insurers lagged, while energy stocks outperformed as oil prices rebounded from declines last week. Miners also gained as iron ore and base metals rose after Chinese banks cut their benchmark lending rates by more than expected.

Among single stocks, JDE Peet’s NV soared after investment holding company JAB agreed to acquire Mondelez International Inc.’s stake in the coffee retailer. Munich Re fell after getting a downgrade. SGS SA and Intertek Group Plc were among the worst performers on Stoxx 600 after RBC downgraded both names, citing more caution on the testing, inspection and certification sector.

Investors are keeping an eye on the health of major economies, with France today getting a downgrade from Scope Ratings in another warning on the state of the country’s finances. The country’s CAC 40 Index underperfomed. Geopolitics are also center stage, with developments in the Middle East, the war in Ukraine, and the upcoming US election on the radar.

Disappointing results last week are also dampening investors’ sentiment. Weak earnings from the likes of ASML Holding NV will likely weigh on technology index heavyweights like SAP SE, which is due to report after the market close today, said Joachim Klement, head of strategy, economics and ESG at Panmure Liberum.

Still, the mixed start to the earnings season is not bad enough to derail the global rally in stocks because recent US data is holding up the soft landing narrative, according to Barclays strategists led by Emmanuel Cau.

The upcoming US election will also keep many investors on the sidelines as the outcome remains uncertain. “Overall, it seems that investors are increasingly cautious about the medium-term outlook over the next six months,” added Klement. “Advances in selected stocks will thus be used to take profits.”

European company executives are more preoccupied than their US counterparts about Donald Trump’s promise to impose tariffs on all imports if he retakes the White House, with mentions of “tariff” more frequent in European company conference calls than those in the US.

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