European stocks edge lower on results from ABB, ASML

BLOOMBERG

European stocks edged lower on Wednesday, weighed down by disappointing results from ASML Holding NV and Swiss industrial conglomerate ABB Ltd, and as traders assessed escalating tensions in the Middle East.
The Stoxx Europe 600 fell 0.1% in London. Chip equipment firm ASML Holding NV dropped as much as 5% after its order intake plunged in the third quarter amid a slump in the semiconductor industry. ABB declined the most in two years after posting worse-than-expected earnings and flagging slowing orders in Europe and China. The drop also weighed on the broader industrial goods sector.
Real estate also declined, while consumer products outperformed as Adidas AG jumped after it boosted its guidance for a second time in three months after selling another batch of Yeezy sneakers from its canceled partnership. In the UK, the domestically-focused FTSE 250 index slipped as data showed inflation failed to slow as forecast in September, leaving open the possibility of a further interest rate hike from the Bank of England. “The picture from the data is unfortunately a simple one — as food and goods prices begin to fall, energy prices are rising again,” said George Lagarias, chief economist at Mazars. “The swiftly rising tensions in the Middle East are exacerbating the situation. A quick end to oil price speculation could, all other things being equal, stop the third inflation wave at the onset and allow prices to normalise,” he wrote in emailed comments.
Europe’s stock benchmark has been treading water this month with sentiment souring. A planned summit between President Joe Biden, who arrived in Israel on Wednesday, and Arab leaders was cancelled following an attack on a hospital in Gaza.
Market positioning has turned more cautious and investors have rotated into defensive sectors and value stocks.
“Uncertainty will last for several weeks at least, and risk premia (on energy prices and on corporate valuations) could even creep higher for a while,” said Roberto Scholtes, head of strategy at Singular Bank. “Investors should definitely get ready for it, seeking diversification and hedges in assets such as short-term government bonds, gold, oil and the energy sector, while the dollar should remain strong for the time being.”
Goldman Sachs Group Inc strategist Cecilia Mariotti also said a prolonged period of geopolitical risk, coupled with sticky inflation, could revive worries about economic growth, making any year-end rally in stocks “smaller and short-lived.”