Europe: Shares close flat as investors weigh US tariff impact on earnings

EUROPEAN shares closed flat on Wednesday as investors weighed the impact of tariffs on corporate earnings after big companies including Adidas, Porsche and Aston Martin flagged potential US price hikes.

Investors were eagerly awaiting the latest round of company outlooks, as these were the first quarterly reports issued since trade uncertainty overwhelmed markets.

The pan-European Stoxx 600 index was flat at 550.24 points, with the auto sector the hardest hit during the day.

Among European luxury carmakers, Porsche dropped 1.6 per cent and Aston Martin slumped 10 per cent after saying they were lifting prices on their cars exported to the US as a result of tariffs.

Germany’s Mercedes-Benz also slid 3.4 per cent after the carmaker estimated a nearly US$420 million tariff impact.

Adidas also warned it may have to hike prices in the United States after reporting US tariffs would add around 200 million euros (S$299.4 million) to costs in the second half. Shares of the sportswear brand plunged 11 per cent.

Still, analysts broadly expect corporate health to improve after the US and EU reached an agreement to reduce tariffs to 15 per cent on EU goods, averting a broader trade war.

“My personal surprise is that (European companies) are adapting very quickly to this new context,” said Alberto Matellan, general manager of MAPFRE’s French asset management subsidiary La Financiere Responsable.

“Maybe tariffs are the trigger to be quicker in adapting to a global shift that was going to happen anyway.”

However, the levies were much higher than earlier this year, and duties on certain sectors such as beverages were still to be decided.

The deal also had market participants reassessing their bets on European stocks after a bumper rally earlier in the year. Wall Street’s S&P 500 has posted the biggest gains for the year, outperforming the Stoxx 600.

Meanwhile banks, which are less exposed to trade concerns, were up for a second day and hit their highest since early 2010.

Swiss bank UBS rose 1.1 per cent after reporting its second-quarter profit more than doubled from last year, while HSBC Holdings fell 3.8 per cent on posting first-half pretax profit below estimates.

Chemical stocks were laggards, falling 1.7 per cent. Dutch speciality chemicals maker IMCD was among the top decliners on the index after quarterly results. The firm slumped 12.5 per cent to a more than four-year low.

Amplifon slumped 25.4 per cent to its lowest since early 2019 after the hearing aid maker cut its annual forecast and reported a drop in second-quarter profit.

JDE Peet advanced 10.7 per cent after the Jacobs coffee maker lifted its annual forecasts and said the direct impact of US tariffs would be small.

Markets globally are now awaiting the US Federal Reserve’s policy decision due later in the day. REUTERS