Europe close: Falling luxury and oil stocks push markets lower

European investors adopted a cautious approach on Thursday after three straight days of gains, as mixed corporate earnings and heavy falls from luxury and oil stocks weighed on markets.

The Stoxx 600 index finished 0.7% lower, pulling back after a 2.5% rise between Monday and Wednesday. Stocks in London were the worst performers, with the FTSE 100 falling 1% as British fashion house Burberry tanked after a disappointing earnings update.

Meanwhile, oil stocks across the continent were lower with Brent crude down nearly 4% at just $77.98 a barrel by the close of play, dropping to levels not seen since July, on reports of higher supply in the US and weak demand from China.

"Following a strong start on Monday, prices soon topped out and reversed lower as concerns over US and Chinese demand took hold, exacerbated by the EIA reporting a large inventories build," said analyst James Harte of Tickmill Group.

"In China, data this week showed that new home prices fell for a fourth straight month, weighing on the demand outlook. Concerns around the health of the property sector have been front and centre since Country Garden, one of the largest Chinese property developers, defaulted on debt payments last month."

The economic data calendar for Thursday was relatively light across the UK and eurozone, with US jobless claims the only major release.

Claims rose to a three-month high, raising hopes that the American labour market was starting to cool – thereby easing the pressure on the Federal Reserve to step in with higher rates to battle an overheating economy.

"Jobless claims rose to their highest level since mid-August, another sign of a cooling in the US economy, and a further brick in the wall of expectations that the Fed is now on pause for the foreseeable future," said Chris Beauchamp, analyst at IG.

Luxury and oil stocks drop

Burberry dropped 11% after the British high-end fashion giant warned that the slowdown in luxury demand is having an impact on current trading and could affect full-year sales, as it reported a huge deceleration in sales growth in the first half.

Comparable store sales rose 10% in the six-month period, with 18% growth in the first quarter slowing to just 1% in the second. The Asia Pacific region struggled in particular, with comparable sales growth easing from 36% to 2% over the two quarters, with Mainland China sales actually reversing 8% in the last three months as spending shifted offshore.

European sector peers LVMH, Prada, Hermes, Christian Dior, Moncler and Kering all finished with deep losses.

Also lower were oil and gas stocks as crude prices dropped. TotalEnergies, BP, Shell and Repsol all lost at least 2% of their value.

German meal-kit group HelloFresh plunged over 20% after a profit warning following worse-than-expected sales growth in North America.

On the upside, Siemens AG was the best performer on the Stoxx Europe 600, rising nearly 6% in Frankfurt after the German tech and industrial conglomerate exceeded analysts' forecasts with a record fourth quarter, with investors shrugging off predictions of a slowdown in the coming 12 months.

For the full fiscal year, comparable revenues rose 11%, at the upper end of Siemens' raised guidance, to €77.8bn. Looking ahead, Siemens is pointing a just 4-8% growth in comparable revenues, net of currency translation and portfolio changes. However, that's still above the 3.7% forecast growth expected by analysts.