European stocks end at over one-week low; beverage makers hurt by US tariffs
Earnings were in full swing in Europe this week as traders gauged the impact U.S. tariffs were likely to have on corporate performance for the rest of the year.
The pan-European STOXX 600 index (.STOXX), opens new tab finished 0.75% lower, with Italian stocks (.FTMIB), opens new tab underperforming the most in major markets with a 1.5% decline.
Italian luxury carmaker Ferrari (RACE.MI), opens new tab slid 11.7% - marking its biggest one-day drop since its listing nine years ago. The stock also weighed on the broader STOXX automobile sector (.SXAP), opens new tab which was down nearly 4%.
The sports-car maker maintained its annual forecasts and said that it will reduce the price compensation it introduced earlier on some cars sold in the U.S., once the U.S.-EU trade deal was effective. However, analysts mulled if the company can sustain its high profitability.
Drugmaker Sanofi (SASY.PA), opens new tab also dropped 7.8% after reporting lower-than-expected earnings, but said that the impact from U.S. tariffs could be manageable.
"When we think about sectors like automotives, pharma and consumer discretionary names — the risk is these sectors are particularly vulnerable to US tariffs," said Craig Cameron, portfolio manager and research analyst at Templeton Global Investments.
"So we're consciously deciding to lean away from them and focus more on utilities, industrials, and financials that are largely domestically driven and insulated from tariffs."
Euro zone banks (.SX7E), opens new tab continued their upward momentum, adding 0.7% on Thursday and have significantly outperformed the broader market in July. The sector logged monthly gains of 49%, compared with the STOXX's 7.6% rise.
The sector also got a boost on the day after Societe Generale (SOGN.PA), opens new tab raised its annual profit target sending its shares up 6.9%, while BBVA (BBVA.MC), opens new tab added 7.9% after second-quarter net profit beat expectations.
Dashing hopes for beverage makers, European diplomats said that wine and spirits exports from the bloc will now face U.S. tariffs until a different deal is agreed in talks expected to continue in the autumn.
The broader STOXX food and beverage sector closed 2.6% lower and was further weighed by a 11.6% slump in Anheuser-Busch InBev (ABI.BR), opens new tab after the beer giant reported a fall in volumes.
Also pressuring equities, the yield on the short-term 2-year German bond rose to touch its highest since April as money markets pared back their bets on upcoming European Central Bank interest rate cuts. They now reflected a 50% chance of an additional 25-basis-point easing move by the end of the year.
In the UK, energy giant Shell (SHEL.L), opens new tab gained 1.1% after beating profit expectations for the quarter.
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It was one of the saddest sights I have seen at a track, mortal tragedy aside. Here was one of the gods of motor racing holding his gloves over his visor to hide his tangled emotions from scrutiny. A few minutes later, he stood before the television cameras inviting Ferrari to sack him from his £60million-a-year job, after qualifying in 12th place for Sunday's Hungarian Grand Prix. At 40, it was if he knew time had sped past him on the outside. Not quite monosyllabic but brief in his answers, he told Sky: 'I'm useless, absolutely useless. 'The team have no problem. You've seen the car's on pole. 'So we probably need to change driver.' Seeing Lewis Hamilton hide his emotions on Saturday was one of the saddest sights I've seen The seven-time world champion told Ferrari to replace him after qualifying 12th in Hungary He has been consistently outqualified and outpaced by his team-mate Charles Leclerc And he walked off to do his print session, which lasted all of 59 seconds. While he was hiding his visor, Charles Leclerc was putting the identical machinery on pole position, one so unexpected that the Monegasque said he no longer understood sport. How Hamilton can compute what is happening to him is impossible to know. He has been outgunned by Leclerc in qualifying 10 times to four. Now, Leclerc is as fast as a bullet over a single lap as there is. But since when was Hamilton, aka the GOAT, excused by any comparison? Leclerc has scored 30 points more than the Englishman in 13 races, not the most damning statistic actually. But week after week, circuit after circuit, it is Leclerc with the greater speed. You look up and, lo and behold, there is three-tenths between them. And here of all places! Where Hamilton has won a record eight times and taken pole nine times. It has been a shrine of revival in dark seasons. Where he won after a previously podium-free 2009 campaign. 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