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European stocks fall as healthcare, construction sectors drag

10/21/2020 | 12:35pm EST
FILE PHOTO:  The German share price index DAX graph at the stock exchange in Frankfurt

(Reuters) - European shares fell for a third straight session on Wednesday, as losses in healthcare and construction stocks countered a lift from encouraging earnings from consumer giant Nestle and telecoms equipment maker Ericsson.

The pan-European STOXX 600 fell 1.3% to close at its lowest in more than two weeks.

Losses were broad-based with only the basic material sector in the green, supported by rising copper prices.

Nestle lifted its 2020 sales forecast following a quarterly beat, but shares inched lower after early gains.

Sweden's Ericsson jumped 9.6% as higher margins and China's 5G rollout helped the company beat quarterly core earnings estimates.

"Earnings have been generally well above expectations, and guidance has been a positive surprise," said Patrick Moonen, principal strategist in the multi-asset team at NN Investment Partners.

"But there are other elements that are currently at play and may have a bigger impact on the market performance than earnings," he said, pointing to many European countries reimposing mobility restrictions following a surge in COVID-19 cases that could weigh on fourth-quarter economic activity.

The STOXX 600 has struggled to break out of a trading range since June, when it recouped a large part of the early pandemic-driven losses. The benchmark is still about 16% below its all-time high.

Capital Economics expects the new containment measures to cause the euro-zone economy to stagnate over the next six months, resulting in only a slight increase in GDP on a quarter-on-quarter basis in the fourth quarter and zero growth in the first quarter of next year.

London's exporter-heavy FTSE 100 underperformed, marking its worst session in a month, hit by a surge in pound after bullish Brexit comments.

Vivendi rose 1.6% after the French media group reported a bigger-than-expected quarterly sales and unveiled plans to list its most-prized asset, Universal Music Group, in 2022.

Third-quarter profits for companies on the STOXX 600 are expected to drop 34.8%, according to Refinitiv data, a slight improvement from the 36.7% predicted at the start of the earnings season.

Of the 29 companies that reported so far, 75.9% have topped earnings expectations.

Gold miner Centamin Plc slumped 19% to the bottom of STOXX 600 after cutting its 2020 production forecast.

Construction companies also took a knocking, with Assa Abloy, the world's biggest lockmaker, falling 4.1% after it reported a drop in quarterly sales.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Sriraj Kalluvila and Lisa Shumaker)

By Sruthi Shankar and Susan Mathew


© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
ASSA ABLOY AB 0.20% 204.5 Delayed Quote.-6.80%
CENTAMIN PLC 1.81% 115.6 Delayed Quote.-10.87%
ERICSSON AB 1.05% 105.95 Delayed Quote.28.56%
EURO / BRITISH POUND (EUR/GBP) 0.16% 0.89606 Delayed Quote.6.21%
EURO STOXX 50 0.99% 3529.13 Delayed Quote.-5.80%
MSCI UNITED KINGDOM (STRD, UHD) -1.53% 979.425 Real-time Quote.-16.45%
NESTLÉ S.A. 0.08% 101.24 Delayed Quote.-3.44%
NN, INC. -2.72% 6.265 Delayed Quote.-30.38%
STOXX EUROPE 600 0.84% 392.89 Delayed Quote.-5.44%
VIVENDI SE 0.32% 25.27 Real-time Quote.-2.48%
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