Europe midday: Stocks push lower as Rolls-Royce tanks; euro slips on Draghi comments
European stocks fell on Thursday as earnings downgrades undermined sentiment, while the euro lost ground against the dollar after European Central Bank chief Mario Draghi hinted that further policy easing may be on the cards.
"Inflation dynamics have somewhat weakened, mainly due to lower oil prices and the delayed effects of the stronger euro exchange rate seen earlier in the year. In addition, price pressures, such as from producer prices, remain very subdued," Draghi said to the Committee on Economic and Monetary Affairs of the European Parliament in Brussels.
The single currency fell as Draghi insisted once again that the Bank is ready to act to combat inflation and by midday, was trading down 0.4% at $1.0712.
Stocks briefly found support from Draghi’s comments, but soon turned lower again. The benchmark Stoxx Europe 600 index was down 0.5%, France’s CAC 40 was down 1% and Germany’s DAX was 0.5% lower.
“European markets are lower across the board on Thursday despite more dovish comments from Mario Draghi that suggest further monetary easing remains on the table in December,” said Craig Erlam, senior market analyst at Oanda.
“With the Fed looking increasingly likely to raise interest rates which has played a big role in the euro falling from 1.15 against the dollar to around 1.07 today, it was possible that the ECB may have delayed its intentions to ease due to the far more favourable exchange rate. Of course, the central bank is prohibited from basing its monetary policy decisions on exchange rates but it’s clear that the stronger euro was having a deflationary impact on the euro area.
On the corporate front, shares in Rolls-Royce tanked after the aerospace and engineering company issued another profit warning.
The jet engine marker said earnings for the year will be at the low end of guidance as it downgraded its expectations for next year and warned of a possible cut to the dividend.
German power producer RWE was also under the cosh after it cautioned that it would only just meet its full-year net profit target.
British Airways and Iberia parent International Consolidated Airlines Group fell as it announced plans to sell €1bn of convertible bonds to help repay a bridge facility it entered into to finance the acquisition of Aer Lingus.
On the upside, German industrial group Siemens advanced after its fourth quarter results beat expectations, while luxury goods maker Hermes International rose after reporting an 8% increase in third quarter like-for-like sales despite a challenging environment.
London-listed luxury retailer Burberry was in the black after it posted a bigger-than-expected rise in first half pre-tax profit.
Zalando shares were higher after the Swiss online retailer impressed with its quarterly sales growth.
Data did little to lift the mood, with figures from Eurostat showing industrial production in the Eurozone slowed more than expected in September.
Still to come on the economic calendar, US initial jobless claims are at 1330 GMT. Investors will also turn their attention to a slew of speeches from Federal Reserve speakers, including chairwoman Janet Yellen.