European Shares Close Unchanged After Worst Losing Run Since ’14

(Bloomberg) -- European stocks suffered a late selloff but still manged to halt their longest losing streak in two years amid some better-than-expected earnings from the region’s banks, and as a U.K. ruling sparked optimism the nation’s split from the European Union won’t be as harsh as feared.

The Stoxx Europe 600 Index closed virtually unchanged. The equity gauge earlier rose as much as 0.8 percent after judges decided the U.K. has to hold a vote in Parliament before starting the two-year countdown to Brexit, a decision that the government said it will appeal. Shares pared gains after data showed orders for U.S. business equipment fell in September by the most in seven months, and service industries expanded less than projected.

“The market is reacting on a short-term view today, but this is one of many unforeseen events we will have,” said Barthelemy Debray, a fund manager at Cogefi Gestion in Paris, referring to the Brexit ruling. His firm oversees 500 million euros ($555 million). “The Brexit battle was never going to be easy for the government and they knew it. The ruling will add clarity but it is not a given that Parliament will be against Brexit.”

Separately, the Bank of England signaled it no longer expects to cut interest rates again this year, intensifying a rise in the pound that pushed the FTSE 100 Index down 0.8 percent. Still, U.K. property shares and lenders helped support the Stoxx 600. Land Securities Group Plc, British Land Co. and Capital & Counties Properties Plc climbed 2.4 percent or more, while Royal Bank of Scotland Group Plc rose 6.1 percent. Better-than-estimated earnings sent Societe Generale SA up 5.5 percent and ING Groep NV up 2.3 percent, while Credit Suisse Group AG lost 7.1 percent as its surprise profit was fueled by one-time gains.

Investors remain skeptical of European shares, which are almost 60 percent more volatile than those on the MSCI All-Country World Index. Mixed earnings reports, anxiety about the U.S. presidential election and lingering concerns about the strength of Europe’s economy amid Brexit uncertainty have weighed on the region’s stocks. They’re heading for their first year of declines since the height of the sovereign-debt crisis in 2011.

The Stoxx 600 has fallen 5.4 percent from a four-month high reached in September, halting a 14 percent rebound from the June low that followed the U.K. secession vote. Since then, speculation about the path of stimulus from the European Central Bank and Federal Reserve, and a rise in debt yields have hurt shares, with bond proxies such as real estate companies and drugmakers slumping about 9 percent or more.

A gauge tracking volatility expectations for euro-area equities is hovering around its highest level since July, posting its longest streak of gains in five years. With a valuation of about 14 times estimated earnings, Stoxx 600 shares are near their cheapest since August relative to global equities.

“We have to look at where we’re coming from,” said Debray. “We will see more volatility until Tuesday’s U.S. presidential election.”

About 60 percent of Stoxx 600 companies that have reported earnings so far this season have beaten profit projections, while almost 50 percent topped sales estimates, data compiled by Bloomberg show. Even though analysts see a 4.1 percent contraction in net income this year, companies that reported on Thursday mostly rose:

• Genmab A/S jumped 11 percent after the Danish biotechnology company raised its annual revenue forecast.
• Dufry AG rallied 6.8 percent after the Swiss operator of duty-free stores reported organic sales growth.
• Beiersdorf AG climbed 4.6 percent after the Nivea cream maker raised its margin outlook.
• Tate & Lyle Plc gained 3.7 percent after forecasting higher annual pretax earnings.
• Vonovia SE advanced 1 percent after the German residential landlord increased its dividend.
• French utility Veolia Environnement SA declined 6.3 percent after sales fell below its own expectations. 
• Adidas AG sank 6.3 percent as its operating profit missed projections.
  
  
  

To contact the reporter on this story: Julie Edde in London at jedde2@bloomberg.net. To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net, Alan Soughley