European shares lower as investors retain cautious tone

European shares lower amid cautious tone Monday. Earnings, politics, US tax reform delay all weigh.

European shares lower as investors retain cautious tone

European shares retained the cautious tone from the end of last week, trading lower Monday morning.

By around midday, the broad EUROSTOXX 600 index was 0.5% lower, while the blue-chip EUROSTOXX 50 had lost 0.35%. On a regional level, the German DAX was 0.6% on the red, the French CAC was down 0.4% while the Spanish IBEX was off 0.2%.

Disappointing earnings updates

Earnings updates disappointed investors Monday. Falls were led by French utilities firm EDF, which lost 12.4% as the company lowered its 2018 earnings, cash flow and power usage forecasts.

Shares in Swiss hearing aid maker Sonova, meanwhile, lost 9.4% on lower-than-expected earnings results, due mainly to US sales.

UK stocks Dignity and Coca Cola HBC lost 7.4% and 5% respectively. The funeral operator warned of rising costs, while the drinks maker was hit by a ratings downgrade.

There were some risers, Monday, however:

  • Swiss pharma stock Novartis gained 0.8% on collaborator news.
  • Shares in Deutsche Post were 0.2% higher on details relating to its scooter delivery service.
  • A weaker pound also supported export-oriented Diageo, who’s shares rose 0.3%.

Investors cautious on weaker pound

European investors remained cautious amid news of British political instability, Brexit talk delays and amid the aftermath of uncertainty on the US corporate tax reform delay, also remains.

UK-political and Brexit related uncertainty has also hit the British pound, However, until some clarity is achieved in negotiations, the outlook for businesses and employment, remains severely clouded.

In the meantime, investors are also calculating the impact of the confirmed delay to the US corporate tax structure reforms. However, as the US Fed remains on track to hike rates at its next meeting in December, it’s likely the US stock markets will retain previous strength more easily.

Currently, the US stock market futures are pointing to a relatively weak open Monday, analysts say.

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