European equities resumed their drop on Friday after two days of declines as investors look ahead to a busy month of earnings amid concerns over a slowing economy.
After posting its worst first-half performance since 2008, the Stoxx Europe 600 Index fell 0.4% as of 12:23pm in London. Retail, utilities and energy were higher, while miners, technology and travel were the worst laggards. The market earlier erased a decline of as much as 1.1%.
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European stocks have been roiled in 2022 by central banks tightening monetary policy around the globe in order to tame inflation, with the region’s main equities benchmark dropping 16% year to date. Now, strategists are looking ahead to first-half earnings reports with concern that companies may be forced to trim outlooks as consumer spending slows and input costs rise further.
“Global earnings are down 10% from the peak and we expect more weakness during the second-quarter earnings season as companies are still under margin pressure from higher energy prices, rising wages, supply chain disruptions, and high logistics costs,” said Peter Garnry, head of equity strategy at Saxo Bank.
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European chipmakers were weaker on Friday after US firm Micron Technology Inc. gave a fourth-quarter outlook that fell short of analyst expectations.
Given the reduced valuations across sectors, some investors may start adding to positions in so-called quality stocks with strong balance sheets and pricing power, according to Kirsty Desson, an investment director at Abrdn.
