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Europe stocks drop on downbeat earnings

written by Bella Palmer

The pan-European STOXX 600 ended 0.3% down at a near one-week low

Europe's benchmark stock index dropped on Wednesday as a number of downbeat corporate earnings dampened sentiment, while investors globally prepared for key euro zone and U.S. inflation data later in the week for new clues on interest rate outlooks.

The pan-European STOXX 600 ended 0.3% down at a near one-week low. However, Germany's DAX rose 0.3%, reaching a new record high, boosted by a 3.9% rise in planemaker Airbus.

Among sectors, real estate was the worst-hit, dropping 1.8% to a three-month low, as sentiment took a beating after Taylor Wimpey reported lower annual profit and said it will build fewer homes this year.

The British homebuilder shed 4.8%. This, along with a 13.3% decline in UK's Reckitt on missing Q4 like-for-like net sales expectations pulled the broader personal and household goods index 1.2% lower.

Technology shed 1.4%, with most components dropping after Tuesday's strong gains. Just Eat Takeaway slid 1.8%, with one trader citing the lack of a new share buyback programme even though the food-delivery company's updated outlook met expectations.

Disappointing earnings have added to any data concerns and provided the excuse for adopting a more defensive positioning, said Stuart Cole, chief macro economist at Equiti Capital.

The STOXX 600 has dropped from an all-time high reached last week as lacklustre earnings deepened worries over the state of businesses amid persistent economic concerns ahead of major inflation data.

The Fed's preferred inflation measure - core PCE is due on Thursday, while the euro zone data is scheduled for Friday.

Any stronger-than-expected inflation data could see markets slide further, but it needs to be taken in the context of the incredible run in equities, Cole said.

ECB Vice-President Luis de Guindos acknowledged slowing inflation but called for further confirmation before trimming rates.


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