European Stocks Weighed Down by Earnings Hit; Heineken Slumps

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(Bloomberg) -- European stocks were muted on Monday as the weakest corporate earnings season since 2020 outweighed optimism that interest rates were potentially peaking. Heineken NV slumped after cutting its profit forecast. Most Read from Bloomberg The Stoxx 600 was little changed at 8:39 a.m. in London. The food and beverage subindex was among the biggest decliners due to Heineken, while mining and health care stocks outperformed. Europe’s benchmark index is on track to post its third monthly gain in four as investors bet that central banks were close to pausing rate hikes. However, stocks are now entering a period of typically poor seasonal returns, with sentiment further dampened by glum economic data as well as weak earnings. Companies are on track to beat profit estimates by the lowest share since 2020, according to data compiled by Bloomberg Intelligence. Moreover, August and September are usually the worst time for European stocks, based on the average performance of the Stoxx 600 over the past 25 years. The benchmark has a history of sliding by about 3% over this period. “The optical richness of stocks does seem to suggest it will be increasingly hard for the market to rally on pure optimism,” said James Athey, investment director at Abrdn. “Obviously, a genuine pick up in earnings would be a more solid foundation on which to base a rally.” “Near-term upside therefore looks likely to come from names who manage to beat earnings forecasts without having to dampen expectations via cautious guidance and provided that the macro data continue to allow the soft-landing dream to live on,” Athey said. SECTORS IN FOCUS: Sectors exposed to China, such as autos and miners, after the Asian country’s top economic planning agency released a wide-ranging policy document Monday containing some recently announced consumption-related initiatives. Story continues For more on equity markets: Sanguine Equity Markets Enter High-Risk Season: Taking Stock M&A Watch Europe: Glencore, Frasers, Tofas, Dr Martens, BAT US Stock Futures Little Changed You want more news on this market? Click here for a curated First Word channel of actionable news from Bloomberg and select sources. It can be customized to your preferences by clicking into Actions on the toolbar or hitting the HELP key for assistance. To subscribe to a daily list of European analyst rating changes, click here. --With assistance from Michael Msika. Most Read from Bloomberg Businessweek ©2023 Bloomberg L.P.