European equities were steady on Tuesday, with a buoyant set of corporate results offset by the impact of weak trade in Asia and a fall in commodities prices amid worries over China’s growth outlook.
The pan-European FTSEurofirst 300 index was flat at 1,533.07 points, with benchmark indexes in France and Germany edging lower.
Traders said volumes were relatively muted in Europe, with just 24 per cent of the 90-day average volume traded by midsession. Surprisingly weak US data released on Monday also weighed on sentiment.
Pan-European equities are down some 7 per cent since peaking in April, with Greece’s debt drama and jitters over China’s move to allow its currency to weaken balanced by the European Central Bank’s asset purchase programme and one of the best earnings seasons in five years.
Chinese stocks plunged on Tuesday, reigniting fears that Beijing may be intent on a deeper devaluation of the currency.
Swiss-listed luxury brands Swatch and Richemont , which have substantial exposure to China, fell over 1 per cent, while energy and mining stocks were also hit by a dip in oil prices and weak metals prices.
“We do not consider this policy move to presage a substantial devaluation of the Chinese currency,” said Michael Stanes, Investment Director at Heartwood Investment Management.
“We think the markets have overreacted to the move and developments might even afford opportunities in currency and financial markets most exposed to the renminbi’s (yuan’s) performance.”
Outperformers in Europe included Wirecard and Denmark’s Jyske Bank, up 8.5 per cent and 4 per cent respectively after quarterly results.
Swiss chocolate maker Lindt & Spruengli saw its shares hit record highs after better-than-expected earnings.
German utility RWE fell 2.5 per cent, with broker downgrades from SocGen, RBC and Berenberg sending the stock to an all-time low.
The Athens stock market dipped into negative territory a day before a German parliamentary vote that looks certain to approve Greece’s new bailout plan, though a significant minority of Chancellor Angela Merkel’s German conservatives are expected to oppose it.
Bloomberg
