Europe close: Stocks hit 11-week low as global earnings underwhelm

A weak start on Wall Street following a negative reaction to earnings from tech giants Meta and Microsoft also dampened sentiment in Europe.

As such, the Stoxx 600 dropped 1.2% to 505.39, its lowest close since 14 August. The recent drop pushes the index down 3.4% for October overall – its worst monthly performance of the year.

"European and UK stock indices were lower across the board. Investors remain wary as they await more corporate earnings and data releases from both sides of the Atlantic. UK gilts continue their downward trend, getting no relief from yesterday’s budget," said David Morrison, senior market analyst at Trade Nation.

Economic data

In macro news, eurozone inflation met the European Central Bank's target level of 2% in October after rebounding strongly from its lowest rate in three years the previous month. Eurostat reported that the harmonised index of consumer prices rose at a year-on-year pace of 2.0% this month, up from 1.7% in September and ahead of the 1.9% forecast.

But, according to Oxford Economics, the upside surprise likely "won't spook the ECB". Rory Fennessy, senior economist, said: "The slight uptick in eurozone inflation in October was expected following the base effect-driven dip in September. Given weak underlying growth dynamics, we think inflation will undershoot ECB forecasts next year and allow for a sustained pace of rate cuts in H1 2025."

In other news, retail sales in Germany unexpectedly rose for the third straight month in September, according to data from the Federal Statistical Office. Retail sales were 1.2% higher over the month in price-adjusted terms, following a revised 1.2% increase in August and much better than the 0.5% drop expected.

Meanwhile, manufacturing activity in China expanded in October for the first time since April, according to figures by the National Bureau of Statistics. The official purchasing managers’ index rose to 50.1 from 49.8 in September, beating expectations for a reading of 49.9. Meanwhile, the non-manufacturing PMI rose to 50.2 in October from 50.0 in September.

Market movers

French financial services group BNP Paribas dropped 5% despite third-quarter profit growth matching analysts' expectations, as the performance of its retail business disappointed.

London-listed medtech group Smith & Nephew tanked 13% as it slashed full-year sales guidance on weaker-than-expected sales in China in the third quarter.

Poor consumer demand in China also hit third-quarter results at Belgian brewing giant AB InBev, which fell 6% after reporting a worse-than-forecast drop in organic volumes.

German industrial titan Siemens edged lower after a $10.6bn deal to take over US software group Altair.

Shell was a rare bright spark after third-quarter profits fell less than expected. The UK oil major said lower commodity prices pushed adjusted earnings down 4% to $6.03bn, well ahead of the $5.36bn expected by analysts.

French lender Societe Generale also saw shares pop 12% after posting better-than-expected quarterly profits and unveiling a shake-up of senior management.

UK packaging group DS Smith also outperformed as shares in International Paper – the US outfit that it is set to merge with in an all-share deal – soared following strong quarterly results.

Auto giant Stellantis gained 3% in Madrid despite reporting that third-quarter shipments dropped 20%. The company said it was working quickly to cut US inventories and remains on track to launch 20 new models this year.

Meanwhile, in Copenhagen, Danske Bank was also up 3% after boosting its full-year outlook after third-quarter earnings at Denmark’s biggest lender smashed expectations.

In London, housebuilding stocks were providing a drag as investors reacted to Wednesday's highly anticipated UK autumn budget, with higher anticipated government borrowing thought to keep interest rates higher for longer. Persimmon, Bellway, Taylor Wimpey and Crest Nicholson fell sharply, along with building suppliers Marshalls and Howden Joinery.