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Tech drags European stocks lower on earnings jitters

Agencies . London
26 Jan 2023 00:00:00 | Update: 26 Jan 2023 03:12:31
Tech drags European stocks lower on earnings jitters

European stocks slipped on Wednesday as lacklustre results from U.S. software giant Microsoft weighed on the broader technology sector, while signs of improving economic outlook in the euro zone fed into worries about further interest rate hikes.

The pan-European STOXX 600 (.STOXX) fell 0.3%, heading lower for a second day with technology (.SX8P) and telecom (.SX8P) declining the most.

Futures signalled a weak open for Wall Street as Microsoft Corp (MSFT.O) slipped 1.6% in premarket trading after the company warned it could miss expectations on cloud earnings in the current quarter, reported Reuters.

“The weak outlook painted by Microsoft is weighing on the wider tech sector,” said Michael Hewson, chief markets analyst at CMC Markets in London.

ASML Holding NV (ASML.AS) slipped nearly 1% from nine-month highs scaled in the previous session. The Dutch chip equipment maker on Wednesday forecast sales growth of more than 25% for 2023.

European stocks came under pressure on Tuesday, as an improvement in economic activity spurred speculation that the European Central Bank (ECB) might have more room to raise interest rates to tackle inflation.

Economists at Deutsche Bank no longer expect a euro zone recession in 2023 and also lowered their inflation outlook, but don’t see the ECB taking their foot off the hawkish pedal just yet.

German business morale brightened in January as Europe’s largest economy started the new year with easing inflation and an improved outlook, the Ifo institute’s survey showed.

Among the big movers, Leopard tanks maker Rheinmetall (RHMG.DE) advanced 1.9% to touch a record high following media reports that Germany is set to send tanks to Ukraine.

This also spurred gains in other defence stocks such as Safran SA (SAF.PA) and Leonardo SpA (LDOF.MI), while Europe’s aerospace & defense index (.SXPARO) touched a near three-year high.

Boosting UK stocks, EasyJet PLC (EZJ.L) jumped 10.6% after projecting it would beat current market expectations for 2023 and deliver a full-year profit.

Shares of BNP Paribas (BNPP.PA) fell 1.4% after German authorities searched the offices of the French bank in Frankfurt as part of investigations in relation to the multibillion-euro tax fraud scheme known as “cum-ex,” German daily Handelsblatt reported.

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