(Bloomberg) -- European stocks ended lower after fluctuating on Wednesday afternoon, as investors weighed an unexpected drop in sales at luxury behemoth LVMH and the negative sentiment generated by a surprisingly tepid outlook from chip-equipment maker ASML Holding NV.
The Stoxx Europe 600 Index was down 0.2% at the close in London, off the lows from earlier in the session, as the continent’s earnings season gets into full swing. Travel, retail and telecoms stocks led gains, while consumer, personal goods and technology stocks were laggards.
UK equities were major outperformers. The FTSE 100 index rose 1% after data showed UK inflation slipping below the Bank of England’s 2% target for the first time in 3 1/2 years. Traders are now betting on back-to-back interest-rate cuts by the BOE in November and December, having previously priced in only one reduction. The more domestically-focused FTSE 250 rose 0.9%.
Meanwhile, Spain’s Ibex 35 advanced 0.6%, hitting a more than 14-year high, making it the second-best performing country benchmark among major European markets Wednesday.
Shares in LVMH fell as much as 7.5% after Europe’s second-biggest company by market capitalization reported sales of fashion and leather goods fell for the first time since the pandemic, exposing a slump in demand from Chinese consumers. Other high-end consumer stocks heavily exposed to China, including L’Oreal SA, Hermes International SCA and Richemont, also suffered losses.
The blow to the luxury sector comes after ASML’s outlook sparked a global rout in technology stocks. On Wednesday, ASML fell as much as 5.8%, accounting for about a quarter of the losses of the Stoxx 600, while combined market-value losses for an index of US-traded chipmakers plus the largest Asian stocks reached more than $420 billion.
Lilian Chovin, head of asset allocation at Coutts, said the earnings season is highlighting the widening earnings and economic growth gap between the US and Europe.
“Luxury goods obviously are suffering, which is a massive headwind for the European market,” Chovin said. “We are seeing a widening EPS growth differential between the US and Europe. The stimulus announcements we had in China stabilized sentiment a bit, but obviously it’s not yet reflected in the numbers.”
Analysts currently expect earnings per share to grow by 9.5% on average for the S&P 500 in 2024 and by 3.8% for the pan-European Stoxx 600 Index.
Francois Rimeu, a strategist at La Francaise Asset Management in Paris, says that given the current trend, 2024 US earnings could end up rising by 10% while Europe’s could finish the year flat.
READ: Earnings Season Tasters Expose US-Europe Gap: LFAM Strategist
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--With assistance from Michael Msika.
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