European shares swung back into the red on Thursday as fears of rising rates and disappointing earnings from US industrials dragged Wall Street down, while HeidelbergCement's profit warning sank European construction stocks. The euro zone's leading stocks index attempted a recovery but finished the day down 1 percent while the pan-European STOXX 600 index slipped 0.5 percent and Germany's DAX slid 1.1 percent.
A weaker open on Wall Street sent European stocks south. US stocks fell across the board as weak earnings reports from industrial firms triggered worries over climbing costs and the impact of tariffs. Meanwhile, Europe's third-quarter earnings season is kicking up a gear after indexes hit a 22-month low last week when jitters over rising US bond yields and geopolitical worries rattled global markets.
"A reality check with companies is clearly welcome with global uncertainties related to trade flows," said Kepler Cheuvreux analysts. French supermarket operator Carrefour jumped up 9.3 percent as it reported a sales growth acceleration in France and Brazil outweighing weakness in Southern Europe.
"A food-driven volume recovery is a key element to a successful, sustainable food retail turnaround and there are signs that Carrefour is beginning to deliver on this," said HSBC analysts. Tech was the worst-performing European sector, down 2.1 percent, with banks down 1.7 percent as investors shed stocks most sensitive to the economic cycle.
Spanish banks Banco Sabadell, Bankinter, Bankia, Caixabank, BBVA, and Santander all fell between 2 and 6.7 percent after the Supreme Court ruled banks must pay stamp duty on mortgage loans, potentially costing them billions of euros in compensation. The biggest earnings disappointment was HeidelbergCement , one of the world's largest cement makers, which fell 8.6 percent after it cut its profit guidance for 2018, citing bad weather in the United States and higher-than-expected energy cost inflation.
"These issues are not entirely unexpected but the impact is modestly higher than expected," said UBS analysts. Other European construction materials firms tumbled too: Buzzi Unicem fell 6.4 percent, LafargeHolcim fell 3.9 percent and CRH down 4.4 percent. Media was among the best-performing sectors, up 0.4 percent, lifted by French advertising agency Publicis which reported stronger third-quarter sales pushing its shares up 3.8 percent.
The media sector has now overtaken the tech sector as Europe's top-performing this year, in a sign of the waning dominance of tech. The telecoms sector also gained, boosted by Sweden's Tele2 which rose 4.7 percent after lifting its guidance on better-than-expected results.
Mobile telecom equipment maker Ericsson also surged up 6.2 percent after its third-quarter profit topped forecasts, boosted by sales of next-generation 5G gear in North America. Novartis shares rose 1.8 percent after the Swiss pharmaceutical company announced it would acquire US-based cancer drugmaker Endocyte for $2.1 billion in cash in an expansion of its radiopharmaceuticals business.
"Today is less about the earnings number and more about the company's transition to much more of a pure-play pharma business, which seems to be going down well with investors who have shown increasing interest in this name over the past few weeks," said Berenberg analysts.