European stocks fall as healthcare, construction sectors drag

By Sruthi Shankar

(Reuters) – European shares fell for a third straight session on Wednesday, as losses in healthcare and construction stocks countered a lift from encouraging earnings from consumer giant Nestle and telecoms equipment maker Ericsson.

The pan-European STOXX 600 <.stoxx> fell 1.0%, in sharp contrast to Asian markets and Wall Street futures that steadied on hopes of a fresh U.S. stimulus package.

Most European sectors slipped, with healthcare stocks <.sxdp> proving the biggest drag, while banking stocks <.sx7p> were supported by rising U.S. and European government bond yields.

Nestle lifted its 2020 sales forecast following a quarterly beat, but shares inched lower after early gains.

Sweden’s Ericsson jumped 5.5% as higher margins and China’s 5G rollout helped the company beat quarterly core earnings estimates.

“Earnings have been generally well above expectations, and guidance has been a positive surprise,” said Patrick Moonen, principal strategist in the multi-asset team at NN Investment Partners.

“But there are other elements that are currently at play and may have a bigger impact on the market performance than earnings.”

Moonen pointed to many European countries reimposing mobility restrictions following a surge in COVID-19 cases that could weigh on fourth-quarter economic activity.

The STOXX 600 has struggled to break out of a trading range since June, when it recouped a large part of the early pandemic-driven losses. The benchmark is still about 16% below its all-time high.

London markets underperformed, with the exporter-heavy FTSE 100 <.ftse> hit by a surge in pound after bullish Brexit comments. [.L]

Vivendi rose 2.9% after the French media group reported a bigger-than-expected quarterly sales and unveiled plans to list its most-prized asset, Universal Music Group, in 2022.

Third-quarter profits for companies on the STOXX 600 are expected to drop 34.8%, according to Refinitiv data, a slight improvement from the 36.7% predicted at the start of the earnings season.

Of the 29 companies that reported so far, 75.9% have topped earnings expectations.

Gold miner Centamin Plc slumped 20.7% to the bottom of STOXX 600 after cutting its 2020 production forecast.

Construction companies also took a knocking, with Assa Abloy , the world’s biggest lockmaker, falling 3.9% after it reported a drop in quarterly sales.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Subhranshu Sahu and Sriraj Kalluvila)