Market Analysis

STOXX 600 quiet as major earnings are expected; energy shares rise

Amos Simanungkalit · 21 Oct10.2K Views

European shares struggled for direction on Monday, following two consecutive weeks of gains, as investors awaited a series of significant corporate earnings reports. However, stabilizing oil prices provided support to the energy sector.

The pan-European STOXX 600 index remained flat at 0845 GMT, oscillating between minor gains and losses. It closed higher last week after the European Central Bank announced interest rate cuts on Thursday, with Austria's central bank governor expressing confidence in controlling inflation.

Recent polls indicate an increasing likelihood of former President Donald Trump winning the upcoming U.S. elections on November 5, a scenario that could negatively impact the European economy. This sentiment was reflected in market activity related to Trump, such as trading in the U.S. dollar and cryptocurrency bitcoin.

"Trump is particularly focused on imposing tariffs, especially on China, but also on other trading partners, including Europe, which would spell trouble for the continent," said Andrea Cicione, head of research at GlobalData.TSLombard. "If Trump secures the presidency along with a Republican-controlled House and Senate, it will be significantly easier for him to implement his policies."

Cicione noted that European companies heavily reliant on U.S. exports will attract attention as the elections approach, along with cyclical sectors that could benefit from potential improvements in the U.S. economy following the rate cuts.

This week, major financial institutions including Deutsche Bank, Lloyds, and Barclays are set to report their earnings, marking the start of the earnings season for the heavily weighted financial sector. German software giant SAP, which accounts for 15% of the DAX index, will also influence tech stocks when it releases its third-quarter earnings after the market closes.

In the meantime, energy stocks led the sector gains with a 1% rise as oil prices stabilized following a 7% decline last week.

Conversely, insurance stocks faced losses, with Munich Re dropping over 2% after Jefferies downgraded its rating to "hold," anticipating limited upside.

In individual stock movements, coffee and tea company JDE Peet's surged 17% after announcing a new CEO and reaffirming its 2024 outlook. Forvia, a French auto parts supplier, gained 9% following new agreements with Chinese automakers BYD and Xiaomi. On the other hand, Switzerland's SGS saw a 2.6% decline after RBC downgraded its rating to "underperform."