European markets close lower amid earnings and inflation worries

European stock markets closed lower on Monday as investors digested a mixed batch of corporate earnings and inflation data. The pan-European Stoxx 600 index ended the day down 0.4%, with most sectors and major bourses in negative territory.

The third-quarter earnings season continued to dominate the market sentiment, with some positive surprises and some disappointments. Among the notable results, HSBC reported a 74% jump in pre-tax profit for the quarter, beating analysts’ expectations and raising its full-year outlook. The bank’s shares rose 3.2% in London, making it the best performer on the FTSE 100 index.

European markets close lower amid earnings and inflation worries
European markets close lower amid earnings and inflation worries

On the other hand, Heineken, the world’s second-largest brewer, posted a 9.1% decline in net profit for the quarter, citing higher costs and lower volumes in some markets. The company also warned of a challenging outlook for the rest of the year, as it faces supply chain disruptions and rising commodity prices. Heineken’s shares dropped 7.8% in Amsterdam, leading the losses on the Stoxx 600 index.

Other companies that reported earnings on Monday include Philips, Ryanair, Spotify, BP, and Siemens Healthineers.

Inflation worries weigh on sentiment

Investors also kept an eye on the latest inflation data from the euro zone and Germany, which showed a further acceleration in consumer prices amid surging energy costs. The euro zone’s annual inflation rate rose to 4.1% in October, up from 3.4% in September and the highest level since January 2002. The figure was above the European Central Bank’s target of close to but below 2%.

Meanwhile, Germany’s annual inflation rate jumped to 4.5% in October, up from 4.1% in September and the highest level since July 1992. The figure was also above the market consensus of 4.3%.

The inflation data added to the concerns about the impact of rising costs on consumers and businesses, as well as the policy response from central banks. Some analysts expect the ECB to start tapering its bond-buying program sooner than expected, while others believe the bank will maintain its accommodative stance until the inflation pressures ease.

Market movers

Among the individual movers, shares of Spotify surged 12.8% in Stockholm after the music streaming service reported better-than-expected quarterly results and raised its full-year guidance. The company said it added 9 million new subscribers in the third quarter, bringing its total user base to 381 million.

Shares of Ryanair gained 4.6% in Dublin after the low-cost airline reported a smaller-than-expected loss for the quarter and said it expects to return to profitability in the current fiscal year. The company also raised its passenger forecast for the winter season, as travel demand recovers from the pandemic.

Shares of BP rose 2.5% in London after the oil giant reported a surge in quarterly profit and announced a $1.25 billion share buyback program. The company said it benefited from higher oil and gas prices, as well as improved performance from its refining and trading businesses.

On the flip side, shares of Philips fell 5.9% in Amsterdam after the health technology company reported a drop in quarterly profit and revenue, citing supply chain challenges and lower demand for its COVID-19 related products.

Shares of Siemens Healthineers dropped 4.7% in Frankfurt after the medical equipment maker reported a decline in quarterly profit and revenue, mainly due to unfavorable currency effects and higher costs.

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