Europe midday: Stocks take hit from profit warnings in tech as G7 debates fiscal stimulus
By Alexander Bueso
Date: Thursday 18 Jul 2019
(Sharecast News) - Stocks on the Continent were lower in early afternoon trading but off their worst levels, with market sentiment dented by a slew of poor corporate updates out of the technology sector on both sides of the Atlantic.
"The selling on Wall Street has continued in Europe this morning, as the Netflix miss generates an understandable amount of caution among investors," said IG's Chris Beauchamp.
"Combined with the CSX warning yesterday afternoon, the news has been enough to sour earnings season thus far, with markets already looking vulnerable to a pullback regardless of whether trade wars return to the agenda or not."
As of 1339 BST, the benchmark Stoxx 600 was dipping by 0.10% to 387.29, alongside a 0.67% drop for the German Dax to 12,258.28, but the FTSE Mibtel was up by 0.38% to 22,162.69.
Technology issues were especially weak, with the Stoxx 600 sector gauge off by 1.75% after SAP reported a drop in new cloud bookings, sending stock in the German software outfit down by 10%.
In parallel, British online fashion retailer Asos plummeted after surprising markets with a cut to profit guidance.
Sentiment towards the sector had been weak from the get-go on Thursday, following the latest quarterly update from US streaming video giant Netflix, which disappointed shareholders, sending its shares 10.38% lower.
However, stock in other tech companies, including IBM and E-Bay, which also released updates after the close of trading in New York on Wednesday, were faring better, with shares of the latter up by 5% ahead of the opening bell on Wall Street.
Shares in France's Richemont were also weaker, on the back of a poor performance for its watch division.
Significantly, Sterling was adding 0.42% to 1.1123 in the background, spurred by comments from the European Union's chief Brexit negotiator, Michel Barnier, in a BBC documentary, that he could be open to an alternative plan for the Irish border.
However, a spokeswoman for the European Commission quickly replied that there is "no news on the Brexit front", adding that the Withdrawal agreement will not be reopened for negotiations.
No major economic data was scheduled for release in the Eurozone on Thursday.
Nevertheless, following two days of meetings, in Chantilly, France, G7 country finance chiefs and central bankers cautiously endorsed fiscal policy support.
"Fiscal policy should be flexible and growth-friendly, while rebuilding buffers where needed," a summary of the talks prepared by the French G7 presidency said.
But not everyone shared that sense of urgency regarding the need for increased spending, with German finance minister, Olaf Scholz, reportedly pushing back and saying "if you do something now, it means the arsenal would be exhausted."
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