EUROPE MARKETS: Gucci Parent Helps Lift Luxury Stocks, But European Markets Stay In Their Rut

By Carla Mozee, MarketWatch Features Dow Jones Newswires

U.K. GDP expands more than anticipated

Continue Reading Below

European stocks wavered Wednesday as investors juggled a fresh round of corporate financial updates, including earnings from Gucci parent Kering SA and brewer Heineken Holding NV.

Investors are also seen as marking time until the European Central Bank releases its monetary policy decision Thursday, when it may reduce its massive asset-purchase program.

What stock indexes are doing

The Stoxx Europe 600 index fell 0.1% to 389.01 after darting into positive territory. Only the consumer services group was moving higher, while utility and oil and gas stocks fell the most. On Tuesday, the index fell 0.4%. (http://www.marketwatch.com/story/european-stocks-wobble-in-muted-action-but-earnings-provide-some-uplift-2017-10-24)

In London, the FTSE 100 lost 0.4% to 7,499.72, with the drop deepening after a better-than expected preliminary reading on third-quarter U.K. gross domestic product propelled the pound higher.

Continue Reading Below

Turning lower, Germany's DAX 30 index slipped 0.1% at 12,999.38, while France's CAC 40 clung to a 0.1% rise at 5,398.30, paring its gain.

What's driving markets?

Shares in some luxury companies pushed higher after Kering SA said its Gucci and Yves Saint Laurent brands helped pushed up quarterly sales.

But the national indexes appeared set to spend another session swaying between small and gains and losses ahead of this week's main event in European financial markets: Thursday's ECB policy decision.

ECB President Mario Draghi and his colleagues are widely expected to say they will start tapering the central bank's bond purchases. But questions remain as to the size of the reduction in monthly purchases.

See:Mario Draghi needs to avoid a 'taper tantrum' when the ECB meets (http://www.marketwatch.com/story/mario-draghi-needs-to-avoid-a-taper-tantrum-when-the-ecb-meets-2017-10-23)

And read: Why Italy faces worst shock in Europe as ECB prepares to taper bond buys (http://www.marketwatch.com/story/why-italy-faces-worst-shock-in-europe-as-ecb-prepares-to-taper-bond-buys-2017-10-24)

The U.K.'s central bank is in focus, too, after a data release showed the British economy doing better than forecast. Thursday's preliminary reading on third-quarter GDP (http://www.marketwatch.com/story/uk-gdp-picks-up-pace-as-boe-gets-set-to-meet-2017-10-25) beat expectations. Growth was at 0.4% over the previous three months, against a FactSet forecast for 0.3%.

The data is expected to be assessed by Bank of England policy makers when they on Nov. 2.

The pound rose to $1.3203 after the GDP report, up from $1.3133 late Tuesday in New York. It has since fallen back somewhat. The euro traded at $1.1767, little changed from $1.1761.

What strategists are saying

-- "Financial markets are becoming increasingly cautious as key risk events approach but there is an ongoing underlying sense of a dollar positive bias in the market," said Hantec Markets analyst Richard Perry in a note.

"The euro is though in consolidation mode ahead of the crucial ECB monetary policy decision tomorrow which could contain a major policy decision on asset purchases. Traders seem unwilling to take a view ahead of this," Perry said in a note.

-- "The big question is where this [GDP report] leaves the Bank of England, which is expected to hike interest rates by 0.25% at its meeting next week," said Kathleen Brooks, research director at City Index.

"There is now an 85% chance of a hike priced in by the UK interest rate futures market, this is up a touch after the GDP report from earlier. If the BOE fails to hike then it could lose its credibility or be accused of leading the market up the garden path," Brooks said in her note.

Stock movers

Kering shares (KER.FR) rallied 7.4% after the company said third-quarter sales climbed 23%, in part as its Gucci label logged at 42.8% jump in revenue.

Shares of other luxury goods companies rose alongside Kering, with Christian Dior SE (CDI.FR) up 0.9% and LVMH Moet Hennessy Louis Vuitton SE higher by 0.9%.

Heineken (HEIO.AE) fell 2% as the world's second-largest brewer said net profit rose 20% (http://www.marketwatch.com/story/heineken-net-profit-rises-20-backs-2017-guidance-2017-10-25) during the first nine months of the year, but also said its full-year expectations remain unchanged.

Shares in Telenor ASA (TEL.OS) leapt 4.6% as the Norwegian telecom company swung to a better-than-expected third-quarter net profit (http://www.marketwatch.com/story/telenor-backs-view-after-accelerating-cost-cuts-2017-10-25) and backed its full-year guidance.

Economic data

German business sentiment surged to a record high in October (http://www.marketwatch.com/story/german-business-sentiment-hits-record-high-ifo-2017-10-25). The Ifo think tank's business climate index climbed to 116.7 points, from 115.3 points in September.

(END) Dow Jones Newswires

October 25, 2017 05:46 ET (09:46 GMT)