European shares tread water amid mix of influences

on Oct 25, 2017

European shares were barely changed from the open, by mid-afternoon Wednesday.

Some upbeat earnings reports were supportive. However, concerns over the Catalonian crisis and uncertainty ahead of Thursday’s European Central Bank (ECB) meeting, combined to keep investor sentiment cautious.

The biggest mover among the pan-European and regional bourses was a 0.2% gain in the French CAC 40. The EUROSTOXX 600 and 50, along with the DAX and IBEX, were only marginally in the green.

Companies in the spotlight

Despite the only minor index-wide changes, some individual stocks were achieving more noticeable moves.

Luxury goods owner Kering, gained some 7% on higher third-quarter sales, boosted by its Italian brand, Gucci. Shares in German airline Lufthansa, meanwhile, were up 3% on a positive earnings update; Q3 earnings were strong and indications for the Q4 were upbeat too.

Bic, Heineken and Peugeot, shares were all in the red, weighing on those gains.

Shares in Bic, the French manufacturer of pens and other small consumer items, slumped 8.7% on disappointing Q3 earnings. Meanwhile, brewer Heineken’s shares slid 2.9% and French carmaker Peugeot shares were 1.3% lower. Both those declines came despite positive earnings updates.

Investors await Spanish, ECB developments

Despite the busy company earnings week, it appears investor’s eyes are now on different details.

The ongoing Catalonian crisis could develop further Thursday. The leader of the secessionist seeking state, Carles Puigdemont, is to appear before the Spanish parliament in Madrid.

Earlier in the week it was thought Puigdemont might formally declare independence in front of Spanish Prime Minister Mariano Rajoy. Now, however, that isn’t considered to be the most likely outcome.

He is still expected to be formally stripped of his role as Catalonian leader. But, dependent on what he says, it could be a slower process than originally anticipated.

In addition, confirmation that the ECB will begin withdrawing its bond-buying support from the economy in 2018 is expected to be announced at the close of the latest ECB policy meeting.

Details of exactly how the ECB will wean the economy off the bond-buying programme, will give investors more clarity over the potential future of the economy’s ongoing recovery.