European stocks were lower on Friday, although still on track to complete their third straight weekly gain in the busiest period for earnings so far this season.
The Stoxx 600 was down 0.3% by 9:44 a.m. in London, with global sentiment muted after the Bank of Japan’s move to loosen its signature yield curve control. The European benchmark remains 1% higher for the week, poised for its longest winning streak since mid-April.
Banking and personal care stocks outperformed today, while real estate and technology underperformed.
Among individual movers, Standard Chartered Plc climbed after it raised its forecasts for income growth for 2023 and added to its share buyback program as rising interest rates propelled earnings. British Airways-parent IAG SA rose as it reported better-than-expected profit on a surge in travel demand.
After a sharp rally earlier this year, European stocks are navigating a season of mixed earnings reports and an uncertain economic outlook. While results overall are set for a weaker showing, a lot of the disappointment appears to be priced in and the level of the negative price reaction skew is lower than the previous five quarters, Morgan Stanley strategists said. The Stoxx 600 has gained nearly 3% since the start of the season.
On the data front, a report showed France’s economy grew significantly faster than estimated and inflation eased, providing a positive surprise as rising interest rates stoke recession fears in the 20-nation euro area.
Still, market strategists said they remain cautious on the outlook for stocks in the second half.
“In an environment where inflation remains uncomfortably high, the labor market is strong and most companies maintain solid balance sheets, we believe that economic conditions will remain tight for longer and probabilities for a recession are high,” said Anthi Tsouvali, multi-asset strategist at State Street Global Markets.
“In such a backdrop, we would prefer defensives to cyclicals and regions that offer quality earnings,” Tsouvali said. “That’s why we prefer US to European equities and we expect the US to continue to outperform in the second half of the year.”
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--With assistance from Farah Elbahrawy and Michael Msika.
