By Barbara Kollmeyer
European stocks dropped for a third straight session on Wednesday, with earnings news overshadowed by investor concerns over the COVID-19 pandemic’s spread in the region and stimulus progress in the U.S.
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP +1.19% dropped 0.9%, after a 0.4% drop on Tuesday. The German DAX /zigman2/quotes/210597999/delayed DX:DAX +1.43% and French CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 +1.54% fell around 1% each, and the FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +1.15% fell 1.3% as the pound climbed. Oil prices were down close to 2%.
U.S. stock futures /zigman2/quotes/208225921/composite SP +2.72% /zigman2/quotes/210598065/realtime DJIA +1.06% /zigman2/quotes/210598365/realtime COMP +2.32% were modestly lower, with earnings rolling in. Shares of streaming video group Netflix /zigman2/quotes/202353025/composite NFLX +1.38% tumbled on Tuesday , with shares dropping in premarket trading.
Investors are closely watching for progress on a new round of fiscal stimulus to combat economic fallout from the pandemic.
White House representatives and House Speaker Nancy Pelosi both said enough progress was made on Tuesday to justify further talks on Wednesday, with an aim of getting a package voted on before the Nov. 3 election.
But markets were watching a potentially bigger risk to a deal from Senate Republicans. The Washington Post reported Senate Majority Leader Mitch McConnell told his fellow Republicans at a Tuesday party lunch that he had advised the White House against a pre-election deal.
“If Republican Senate leader Mitch McConnell refuses to introduce a bill, then the stimulus is dead in the water until post the U.S. election,” said Jeffrey Halley, senior market analyst at Oanda, in a note to clients.
“Over two-months away and a lifetime in the grander scheme of 2020,” he said. “Financial markets are blithely ignoring this very real and obvious risk…”
Rising coronavirus cases on both sides of the Atlantic continued to weigh on investors. In Spain, officials are reportedly considering a nationwide curfew, which would echo efforts seen in other European countries that are battling autumn infection waves.
Fresh concern over a second wave was expressed by European Central Bank President Christine Lagarde.
“I think that most scientists and the various scientific bodies were expecting the virus to take off again in November and December, alongside the cold weather with factors that had nothing to do with the virus,” said Lagarde in prerecorded comments released on Tuesday, for an interview with French news channel LCI.
“But it has come earlier and from that point of view it was a surprise and of course that doesn’t bode well,” she said.
Data showed U.K. annual inflation rose 0.5% in September , versus a 0.2% rise in August, the Office for National Statistics said. Contributing to the increase were higher transport costs and higher prices at restaurants, after the end of the government’s Eat Out to Help Out program, which cut the price of meals.
Weighing on the FTSE 100, the pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.1275% jumped 0.9% to $1.3057 after the European Union’s chief negotiator Michel Barnier reportedly said a trade agreement with the U.K. was “within reach” if both sides could work hard to overcome “sticking points” in coming days. The dollar was also generally weaker across the board.
Investors were also absorbing a fresh crop of earnings out of Europe.
Shares of Ericsson /zigman2/quotes/208932705/composite ERIC +1.84% /zigman2/quotes/208932705/composite ERIC +1.84% surged 7%, after the Swedish telecommunications equipment maker backed its full-year group targets and reported stronger-than-expected profit. Ericsson saw limited impact from COVID-19 and increased demand for 5G.
Randstad /zigman2/quotes/202421454/delayed NL:RAND +1.67% shares climbed 7%, after the Dutch recruitment company said third-quarter net profit fell, but revenue saw a partial recovery from a pandemic hit. The company said volumes for early October hinted of further positive momentum.
Nestlé /zigman2/quotes/208115528/delayed CH:NESN +0.39% /zigman2/quotes/210131093/composite NSRGY +0.70% reported falling sales for the first nine months of the year, but lifted full-year guidance as demand for the Swiss food giant’s at-home products remained strong. Shares of Nestlé were unchanged.