European shares drop from record highs

The pan-European STOXX 600 index closed 0.5% lower at 618.52 points

European shares dropped on Thursday, erasing earlier gains that pushed markets to record highs, as financial and industrial stocks declined and investors digested a flurry of corporate earnings.

The pan-European STOXX 600 index closed 0.5% lower at 618.52 points, with most regional benchmarks also reversing course to close in negative territory.

Financials weighed heavily on the index, with the banking sub-index slipping 1.8%. HSBC and Banco Santander each shed more than 2%, leading the sector’s decline.

Industrial goods and services sub-index declined 1.2% with Dutch payments processor Adyen falling 21.9%, marking its sharpest one-day decline in more than two years, after cautious guidance.

DSV, the world’s largest freight forwarder, posted its sharpest decline in almost six years, dropping 10.5%.

Meanwhile, the European utilities index was down 0.4%, as it tracked a sharp slide in carbon prices after suggestions the EU should intervene in the market, a move that investors fear could squeeze the sector’s earnings.

I think utility companies are the obvious targets. It’s going to hit margins and it also runs the risk of increasing inflationary pressures if those costs are passed on to the large energy consumers, said Nick Saunders, CEO of trading platform Webull UK.

Luxury stocks bucked the trend, gaining 1.3% as France’s Hermès hit a near one-month high following another quarter of steady revenue growth, powered by robust sales in the U.S. and Japan.

On the M&A front, money manager Schroders rose 28.6% after U.S. asset manager Nuveen agreed to buy the UK company for £9.9 billion ($13.5 billion), creating a group with combined assets under management of around $2.5 trillion.

Despite Thursday’s sharp losses, the STOXX 600 remains up 4.4% year-to-date, having navigated headwinds including U.S.-Europe trade tensions over Greenland and recent selloffs in commodities and technology stocks.