(Bloomberg) -- European stocks were little changed on Friday, with underwhelming earnings from big names like Mercedes-Benz Group AG hitting sentiment as investors assess multiple risk events on the horizon.
The Stoxx Europe 600 Index ended the session flat with travel stocks, insurers and construction among the worst-performing sectors.
Earnings were front and center, especially among companies in the luxury end of their respective markets. Weaker demand in China hit Mercedes-Benz’s results. Distiller Remy Cointreau SA fluctuated before closing higher as it slashed its annual sales guidance.
Electrolux AB was the single biggest faller, dropping after the Swedish household appliance maker’s earnings disappointed due to underperformance in its North American market. The UK’s Lloyds Banking Group Plc and Close Brothers Group Plc declined following a motor-finance ruling.
On the positive side, Sanofi SA shares gained after the pharmaceuticals maker’s profit was boosted by demand for seasonal vaccines.
Equities in Europe have dipped slightly this month as trading remains cautious in the face of approaching risks including the UK budget and the US election. Sectors most exposed to China’s economy, such as luxury stocks and miners, have come under particular pressure as investors assess the outlook for the country’s push to revive its stalling economy.
Mathieu Savary, chief European investment strategist at BCA Research, said that equities in the region are facing many hurdles, with a deceleration in global growth creating a strong headwind to earnings.
“It would take clear signs that the world can avoid trade tensions, and that manufacturing activity is strengthening again, for European stocks to break out,” Savary said.
However, there are some reasons to remain positive. Earnings beats are coming in above average in both the US and Europe, according to Barclays strategists, while some market-watchers like Morningstar’s Michael Field view European equities as a “better bet” when compared with the US.
“The direction of travel is a bit more unknown in the US,” Field said by phone. “Growth is fine, but inflation’s a bit more stubborn, we’re not sure if they can cut rates as quickly in the US, whereas we know in Europe now they are going to keep cutting rates.”
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--With assistance from Michael Msika.
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