Europe close: Carmakers drive markets lower as earnings disappoint

European stock markets finished with heavy losses on Tuesday, with the exception of the UK's FTSE 100, with positive eurozone GDP data failing to lift the mood following some disappointing corporate results from some the region's heavy hitters.

The Stoxx Europe 600 index closed down 0.7% at 505, with a flat finish in London outweighed by heavy losses in Frankfurt and Paris (both down 1%), Milan (-1.6%) and Madrid (-2.2%). Losses were extended in afternoon trade after a poor start on Wall Street.

There were further signs that the eurozone was starting to turn a corner as inflation held steady at 2.4% in April, while data showed that the single currency economy avoided recession in the first quarter of the year.

GDP across the eurozone expanded by 0.3% in January-March, according to Eurostat, ending the technical recession of last year when the economy shrank by 0.1% in both the third and fourth quarters of last year. Stronger-than-expected growth in Germany, France, Italy and Spain was the main driver, assisted by lower energy prices.

However, core inflation - which strips out volatile items such as food and energy - fell to 2.7% in April, down from 2.9%, but ahead of forecasts of a larger fall to 2.6%.

"All-in-all, the numbers are moving in the right direction, and close enough to the ECB’s 2% target to keep the expectation of a 25 basis point cut in June on track," said David Morrison, senior market analyst at Trade Nation.

Carmakers disappoint

Volkswagen's share price reversed 5% after the German automaker reported a slow start to the year, though the company expressed its confidence in hitting full-year targets. Sales revenues were down 1% year-on-year in the first quarter at €75.5bn, with unit sales dropping 2% to 2.1m. The company said the performance was "muted as expected", blaming an unfavourable country, brand and model mix.

Sector peer Mercedes-Benz also fell 5% after posting a 30% annual fall in first-quarter EBITDA as it was weighed down by model changes and soft demand for electric vehicles.

Renault, Peugeot, Porsche and BMW also all finished with heavy losses.

Spanish banking group Banco Santander also finished down 2% despite saying that revenues rose a better-than-expected 10% in the first quarter, boosted by higher interest rates.

Swiss dental implants maker Straumann slumped 11% despite reporting 15.1% organic sales growth for the first quarter, driven by high demand for its premium implants across its markets.

UK investment platform Hargreaves Lansdown jumped 4% after reporting good momentum in April as clients invested at the start of the tax year to claim more benefits.

Danish brewing giant Carlsberg fell despite announcing a DKK1.0bn (£110m) share buyback after a solid start to 2024 with strong growth in Asia, specifically in China and Vietnam.