European rally fades ahead of earnings

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A rally in European stocks fizzled out yesterday as poor results drove down advertising agency Publicis and a slide in metals prices dragged on the market.

As the earnings season got into full swing, the pan-European STOXX 600 ended the session 0.2pc lower, down from the one-month high it reached in the previous session, as investors focused on a mixed bag of company results.

France’s Publicis shares tumbled 8.8pc after an unexpected drop in second-quarter sales caused by underperformance at its US healthcare communications business.

“While operating margin was significantly ahead of expectations, the focus will be on the weaker revenue numbers, especially as US ad agency Omnicom earlier this week also underperformed expectations,” wrote Liberum analysts.

Publicis took British rival WPP down nearly 3pc along with it, and the media sector fell 1.4pc.

Europe’s biggest tech stock, business software provider SAP, had a choppy session but ended 3.5pc lower.

Its second-quarter results showed weaker-than-expected licences growth, though it raised its outlook.

Overall, investors are optimistic going into the European earnings season, which is expected to deliver stronger growth than the first quarter.

“Earnings globally are still coming in on average higher than expectations,” said Christopher Peel, chief investment officer at Tavistock Wealth. “I don’t see anything going to stop it unless the trade tariff spat escalates and starts to bite.”

Topping the STOXX was French telecoms firm Iliad, up 7.4pc on news it had reached a million subscribers in Italy and would extend its low-cost offer there.