By Steve Goldstein
European stocks weakened on Thursday after the U.S. accused foreign rivals of election interference, even as progress appears to have been made on a new round for stimulus for the U.S. economy and earnings have largely been better than anticipated.
The Stoxx Europe 600 (STOXX:XX:SXXP) dropped 0.6%, and the German DAX (XEX:DX:DAX) lost 0.7%. The French CAC 40 (PAR:FR:PX1) and U.K. FTSE 100 (FTSE:UK:UKX) also fell.
U.S. stocks (S&P:SPX) fell on Wednesday, while bond yields (XTUP:BX:TMUBMUSD10Y) rose, amid talks over a fiscal stimulus package. A spokesman for House Speaker Nancy Pelosi said talks between her and U.S. Treasury Secretary Steven Mnuchin have reached a stage where they are “closer to being able to put pen to paper to write legislation,” and will continue on Thursday.
“The recent bond market selloff is a first sign that the market might be tentatively buying into the reflation trade, one which could have wide-ranging cross-asset implications,” said Michael Brown, senior market analyst at Caxton in London.
The U.S. accused Iran of interfering in the coming election, saying the country was behind threatening emails to Democratic-registered voter s in battleground states, and that Russia also obtained voter registration data. Former Vice President Joe Biden and U.S. President Donald Trump will have their second and final debate on Thursday night, after markets have closed.
Futures on the Dow Jones Industrial Average (DOW:DJIA) fell 98 points.
Chris Scicluna, head of research for Daiwa in London, said the significance of the interference news to markets was that it might further encourage Trump to dispute the outcome of the election.
Europe is still grappling with a rise in COVID-19 cases. Over the last 14 days, the Czech Republic, the Netherlands, and Belgium have the highest infection rate per capita, according to the European Centre for Disease Control. U.K. Chancellor Rishi Sunak is expected to announce aid to companies caught up in the new restrictions placed on hard-hit regions.
The European Union and the U.K. also are set to resume talks on a trade deal for when the U.K. ends its current arrangement with the bloc at the end of the year.
Earnings season rolls on on both sides of the Atlantic, and, for the most part, has exceeded expectations. According to FactSet, Stoxx 600 earnings are now expected to drop 31% in the third quarter, versus the 35% decline expected at the end of June.
International Airlines Group (LON:UK:IAG) dropped 2% as it reported worse-than-expected revenue in the third quarter, and said it wouldn’t meet its goal of being break-even on cash flow in the fourth quarter as it will operate at 30% of capacity.
Unilever (LON:UK:ULVR) edged up 1%, as the consumer products giant reported better-than-forecast revenue and maintained its dividend.
Schneider Electric (PAR:FR:SU) rose 3%, as the French energy-management company said it now expects sales for the year to fall between 5% and 7% vs. previous guidance of a drop between 7% and 10%.
Shares of Varta (ETR:XE:VAR1) , a German battery technology company, slumped 7% after extending the contract of its chief executive, Herbert Schein, until 2026.
German-listed shares of electric-car maker Tesla (ETR:XE:TL0) (NAS:TSLA) rose 4% after it reported a stronger-than-forecast profit on regulatory credit sales.