European shares slip but log sixth straight month of gains

Reuters

Published Jul 30, 2021 05:04AM ET

Updated Jul 30, 2021 12:06PM ET

By Sruthi Shankar and Shreyashi Sanyal

(Reuters) -European stocks fell from record highs on Friday as concerns about the fast-spreading Delta variant and regulatory actions in China outweighed optimism around the quarterly earnings season and an economic recovery.

The pan-European STOXX 600 index fell 0.5%, but rose for a sixth straight month in July, its longest winning streak since 2012-13 when it rose for 12 months in a row.

"We've seen moves in both directions this week, but they've lacked any sort of conviction," said Michael Hewson, chief market analyst at CMC Markets.

"The overriding concern being whether the second half of the year will be able to match up to some of the decent numbers we've seen from various company updates this week."

Travel and leisure stocks and miners were the top decliners.

Italy's UniCredit gained 2.8% after posting higher-than-expected net profit, and said late on Thursday it had embarked on formal talks with the government over the possible acquisition of rival Monte dei Paschi di Siena. Monte dei Paschi added 3.4%.

EssilorLuxottica rose 3.4% as the Ray-Ban maker raised its full-year guidance after revenue doubled in the second quarter.

Overall, out of half the STOXX 600 companies that have reported so far, 67% have topped analysts' profit estimates, according to Refinitiv IBES data. While that is below the 72% beat-rate in the first quarter, it still tops the 51% rate in a typical quarter.

"We have had exceptional expectations, yet the companies have managed to beat those expectations," said Oliver Collin, fund manager of European equities at Invesco. "Interesting thing in Europe is those beats, quite different to the U.S., were rewarded in some sort of positive share price momentum."

Collin believes European equities' slant toward cheaply valued cyclical sectors and a stronger recovery momentum in the second quarter played a part in prompting the recent positive market response.

The euro zone economy grew more strongly than expected in the second quarter as the bloc rebounded from a recession caused by the COVID-19 pandemic, preliminary data showed.