European stocks slide on corporate earnings fears

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European stocks fell slightly on Monday as investors remained cautious about the outlook for the global economy after a series of cautious corporate earnings reports.

The regional Stoxx Europe 600 gave up early gains to fall 0.1% in early trading, dragged down by energy and consumer goods stocks. London’s FTSE 100 lost 0.1%.

Contracts that track Wall Street’s benchmark S&P 500 fell 0.6%, while those that track the tech-heavy Nasdaq 100 lost 0.9% in thin trades.

Both indexes ended higher on Friday, posting consecutive weekly gains for the first time since August as companies like Amazon, Facebook owner Meta and Alphabet disappointed investors with their third-quarter results and forecasts.

John Butters, senior earnings analyst at FactSet, said S&P 500 companies have so far reported earnings 2.2% above estimates. This would be the index’s weakest earnings growth rate since the third quarter of 2020. The energy sector, however, reported earnings growth of 134%.

Investors have been watching the latest corporate earnings season for signs of strain from high inflation and rising borrowing costs. Companies like Pfizer, Airbnb and Uber report Tuesday.

The fears overshadowed widely anticipated policy meetings at the Bank of England and the US Federal Reserve this week.

The Fed is expected to implement its fourth straight rate hike of 0.75 percentage points on Wednesday and signal further hikes ahead in a bid to rein in rapid price growth.

The central bank’s favorite inflation measure, the core personal consumption expenditure index, rose 0.5% month-on-month for September last week, in line with economists’ expectations and down from 0. .6% in August.

Mark Haefele, chief investment officer at UBS Global Wealth Management, said the latest inflation figures meant it was “too early” for the Fed to follow the Bank of Canada or the European Central Bank to send out “less warmongering signals”.

The Bank of England is also expected to raise borrowing costs by 0.75 percentage points on Thursday, in its first meeting since previous Chancellor Kwasi Kwarteng’s disastrous “mini” budget of unfunded tax cuts.

Elsewhere in the stock markets, the Japanese Topix gained 1.6% and the South Korean Kospi gained 1.1%. Hong Kong’s Hang Seng index fell 0.8%, while China’s CSI 300 lost 0.9%.

In government bond markets, the yield on the 10-year US Treasury added 0.02 percentage points to 4.03% as its price fell. The yield on the 10-year German Bund also rose 0.02 percentage points to 2.1%.

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