(Bloomberg) -- European stocks fell afresh on Tuesday as the start of the earnings season in the region continued to disappoint.
The Stoxx Europe 600 ended the session 0.3%% lower, extending Monday’s 1% slide. Basic resources, consumer stocks and autos were the worst laggards, while the construction sector gained.
The impact of China’s slowing economy was on full display as earnings continued to trickle out, especially in the luxury sector. Hugo Boss slumped after the German fashion retailer cut its profit guidance due to weakness in key markets such as China and the UK. Richemont posted solid sales and gained, while still pointing to some weakness in China.
Elsewhere miner Rio Tinto Group fell as it cited muted Chinese demand, and warned full-year copper output would be at the lower end of its guidance range.
“We are only just at the start of earning season but people will be looking particularly at the guidance from more export-sensitive European names, just looking for any signs of how they’re seeing both the impact of China as an end market, but also as a competitor,” said Sunil Krishnan, head of multi asset funds at Aviva Investors.
Among banks, Swedbank AB dropped after reporting a decline in net interest income. Ocado Plc was among the winners, rising after it revealed an improvement in net cash flow and guided for a better-than-expected underlying profit.
European stocks missed out on a Wall Street rally that was fueled by bets on Donald Trump’s return to the presidency following a failed assassination attempt. Many analysts expect the European market to take a hit from higher tariffs and increased trade tensions under a potential Republican government.
However, Europe’s earnings season offers some optimism that the region can turn a corner later this year, according to Ben Seager-Scott, chief investment officer at Forvis Mazars.
“With expectations quite low, positive surprises could lead to positive price movements — unlike what we have seen in places like the US, where high expectations meant positive surprises weren’t really rewarded,” Seager-Scott said.
Investors are digesting the European Central Bank’s bank lending survey, which showed banks reported the first increase in demand for consumer credit and housing loans since 2022. The ECB is expected to hold interest rates steady at its Thursday meeting but could hint at a cut in September.
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--With assistance from Farah Elbahrawy, Sujata Rao, Michael Msika and Kit Rees.
(NOTE: A previous version of the story corrected an industry group move in second paragraph.)
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