European stocks inch lower as earnings, oil weigh; HSBC, SocGen rally

European stocks traded slightly lower Wednesday but banking stocks backed by results from HSBC and Societe Generale, rallied as investors digest some more earnings and a fall in the oil price.

The pan-European STOXX 600 was down 0.28 percent.

Banks in focus

The banks were once again in focus for investors after getting hammered Tuesday. HSBC, one of Britain’s largest lenders, reported $3.61 million in profit before tax for the second quarter on Wednesday, a sharp decline from the previous quarter’s $6.11 billion figure. HSBC, however, announced a $2.5 billion share buyback plan, which sent shares sharply higher.

Meanwhile, French bank Societe Generale beat expectations in the second quarter, sending shares into positive territory. SocGen Chief Executive Frederic Oudea told CNBC he was comfortable with current capital levels despite the lender’s performance in recent European banking stress tests.

And Credit Agricole said its second-quarter net income was up nearly 26 percent, adding that it had completed an overhaul of the group’s structure, a moved cheered by investors.

Dutch bank ING Group was up over 4 percent after it reported second-quarter underlying net result up nearly 27 percent year-on-year.

The health of the Italian banks has been of concern to investors, despite the country’s Prime Minister Matteo Renzi telling CNBC that “Italian banks are good”. Shares of Banca Monte dei Paschi di Siena (BMPS), one of Italy’s most troubled lenders, rallied after Il Sole 24 Ore reported that six more banks were set to join the eight that are already part of a consortium underwriting a 5 billion euro cash call by BMPS.

Earnings to watch

The insurance names are also in focus after AXA, Europe’s second-biggest insurer, reported a 4 percent rise in first-half net profit that fell short of analyst expectations. Shares in the French firm were lower.

Elsewhere, British retailer Next said full price sales in the second quarter were 0.3 percent higher year-on-year, but warned sales in 2016 could fall by 2.5 percent. Still, this was improved guidance from the clothing store, which helped its shares rally on Wednesday.

Miner Rio Tinto reported a 47 percent year-on-year plunge in underlying earnings in the first half of the year, warning that the “global macro-economic environment that is still fragile”. Shares were slightly lower.

Shares of German tiremaker Continental were down neatly 4 percent despite raising its 2016 earnings forecast after posting a 13 percent rise in half year net profit.

Deutsche Post was near the top of the STOXX 600 after it sold its long-distance bus unit to Flixbus, and posted a 40 percent rise in group earnings before interest and tax in the second quarter.

On the other end of the STOXX 600, Aggreko tanked over 11 percent after the temporary power equipment maker reported a sharp fall in first-half pre-tax profit.

And shares of price comparison website Moneysupermarket fell sharply despite a rise in first-half profit, after the chief executive Peter Plumb said he was stepping down.

Central bank toolbox ’emptier’

Europe’s markets followed the trend set in Asia, where markets lost ground, with the Nikkei selling off on the back of another yen spike amid ambivalence towards the country’s stimulus plan.

Japan approved a $274 billion package of fiscal stimulus measures on Tuesday, leaving many market participants disappointed. It also comes after the Reserve Bank of Australia cut interest rates.

“Investors are slowly realizing that with every spin of the central bank policy chamber the magazine is getting emptier, and in the absence of any will or ability of politicians to step up, central bank policy will continue to move into the realms of the more experimental with every passing day,” Michael Hewson, chief market analyst at CMC Markets, wrote in a note on Wednesday.

Meanwhile in the U.S., stocks closed lower on Tuesday as U.S. oil settled below $40 for the first time since April amid oversupply concerns and as the Dow closed lower for the seventh straight day.

Oil markets remain in focus, although prices edged up early on Wednesday, supported by a weaker dollar. U.S. crude futures remained below $40 per barrel and Brent was below $42 as ongoing fuel oversupply and stuttering economic growth weighed on markets.

Source: CNBC

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