European markets experienced their largest weekly decline since early September, with investor confidence weakened by escalating unrest in France and surging oil costs, despite positive corporate earnings reports. The pan-European Stoxx 600 index declined by 0.31% to settle at 635.77 points on Friday.
The benchmark’s weekly loss now stands at approximately 1.4%, concluding a period dominated by earnings updates from major firms including SAP, Barclays, and Kering. While analysts have revised upward earnings projections for European corporations, rising fuel costs and France’s political instability have created market uncertainty.
Josh Stevens, chief investment officer at CresAlta Investment Management, commented, “What’s happening in France will at least persist as a market factor through the election cycle. The protests might dissipate, but it doesn’t change the financial reality that France is facing.” The ongoing unrest serves as a critical factor ahead of next April’s presidential election.
Market participants will closely monitor Moody’s upcoming decision on France’s credit rating later today. Meanwhile, Kering’s shares plunged 16.6% after its luxury division Gucci reported weaker-than-expected third-quarter sales, making it the worst-performing stock on the Stoxx 600.
Ipek Ozkardeskaya, senior analyst at Swissquote, observed, “The European luxury sector continues to suffer from the Middle East war and China’s weakened appetite.” In contrast, L’Oréal’s stock rose 5.6% following stronger-than-anticipated third-quarter revenue.
Defense-related equities fell 3.8%, their sharpest daily drop since June 1, led by a 10% decline in Safran, the French aerospace manufacturer, after its earnings report. The European Central Bank will convene next week, with traders assigning over 91% probability to a decision maintaining current interest rates.
The ECB has raised borrowing costs twice this year to combat inflation fueled by higher oil prices. Holcim’s shares climbed 5% after the Swiss cement maker raised its full-year earnings forecast, while French food caterer Sodexo rose over 6% after stronger-than-expected full-year revenue. Volvo Cars slumped over 24% to a record low after reporting a bigger-than-expected third-quarter operating loss.
Investors will next focus on earnings from oil giants BP and Shell, scheduled for release next week.
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