By Amruta Khandekar
(Reuters) -European shares dropped on Thursday, hit by a rise in U.S. Treasury yields and a slew of weak earnings reports including from Standard Chartered in the run up to the European Central Bank’s policy decision later in the day.
The pan-European STOXX 600 index fell 1% by 8:30 GMT and hovered near a seven-month low, with automakers and banks leading declines.
The benchmark index tracked a slump on Wall Street overnight as longer-dated yields edged closer to the 5% level, rekindling fears about U.S.
interest rates staying higher for longer in the face of a resilient U.S. economy.
Lacklustre lending data and evidence of faltering economic growth in the euro zone has bolstered expectations that the ECB will keep its key interest rate unchanged at a record 4% high at 1215 GMT.
“There is recession risk, there’s geopolitical risk, there’s bond risk and poor economic data from across the region,” said David Morrison, senior market analyst at Trade Nation.
Bank shares were a big drag on Thursday, down 2.3% as more earnings reports from the sector trickled in.
Standard Chartered shares slumped 11.3% and were set for their worst day in over three years as the lender’s third-quarter pre-tax profit dropped 33% while BNP Paribas fell 4.1% on reporting a fall in trading revenue.
Swedbank shed 8.3% after third-quarter net interest income fell below market expectations.
Automakers fell 2.7%, weighed by a 5.5% decline in Mercedes-Benz post a drop in third-quarter earnings and as Sweden-based automaker Volvo Cars lost 10.3% despite robust earnings.
HelloFresh sank 10.6%, with the German meal kit-maker’s third quarter earnings falling short of expectations, while a drop in quarterly sales dragged shares of consumer giant Unilever 2.7% lower.
Among gainers, BE Semiconductor (BESI) rose 9.1% to top the STOXX 600 as the Dutch semiconductor equipment supplier’s third-quarter gross margin beat estimates.
Swedish defence contractor Saab climbed 4.6%, helped by a jump in third-quarter profit.
Overall, analysts expect STOXX 600 earnings to slump 9.7% in the third-quarter, bigger than a 6.6% decline forecast at the beginning of July, per LSEG data.
Investors are also watching out for third-quarter U.S.
gross domestic product data for further clues on the interest rate trajectory.
(Reporting by Amruta Khandekar; Editing by Dhanya Ann Thoppil and Nivedita Bhattacharjee)
