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* Ericsson flags supply chain issues
* Danone slips as Q3 sales growth slows
* Roche falls as COVID-19 treatment fails to help patients
(Updates to close)
By Anisha Sircar, Sruthi Shankar and Susan Mathew
Oct 19 (Reuters) - Some positive earnings and defensive
buying kept Europe's main stock index in the black on Tuesday,
helping offset losses in Sweden's Ericsson and French consumer
goods giant Danone after downbeat results.
The pan-European STOXX 600 rose 0.3%, staying close
to one-month highs. Utilities and industrials
led gains, while German reinsurer Munich Re rose 2.6%
after doubling its profit in the third quarter.
Some upbeat earnings from Wall Street, including Johnson &
Johnson and Travelers, also boosted sentiment.
Capping gains were food and beverage names after
Danone warned of growing inflationary pressures next
year, pulling France's CAC40 index 0.1% lower. Danone,
peers Nestle and Unilever slipped between 1.3%
and 3%.
Telecom stocks followed, down 0.8% as Sweden's
Ericsson and Tele2 fell 3.7% and 4.3%,
respectively, after earnings. Ericsson announced plans to reduce
its operations in China after suffering a big sales drop in one
of its biggest markets.
As Europe's third-quarter reporting season kicks into high
gear, investors are scrutinising company results for any signs
that supply-chain strains, labour shortages and surging energy
prices are starting to undermine profits.
Third-quarter profits at European companies are expected to
grow 47.6% from the same period in 2020, according to Refinitiv
I/B/E/S data, with earnings revisions by analysts cooling
recently but still remaining positive.
"It's hard to see how further optimism about earnings would
boost the market too much at this point just because of how much
good news is already discounted in share prices," said Thomas
Mathews, markets economist at Capital Economics.
The STOXX 600 has gained almost 3% so far in October after a
3.4% drop in the previous month, as investors turned to riskier
assets in expectation of a steady earnings season.
"With rates starting to rise and inflation picking up, the
days of big, sustained rallies in the market are over, but we
can expect to see European equities grinding higher for a
while," said Mathews.
Investors have been aggressively pricing in interest rate
hikes, particularly in the UK, to offset a surge in energy
prices and other bottlenecks driving general prices higher.
Gains in UK's FTSE 100 were capped by British
Airways owner IAG after the UK aviation regulator said
Britain's biggest airport Heathrow will not be permitted to
raise passenger charges by as much as it had
wanted.
Drugmaker Roche fell 1.7%, after its partner Atea
Pharma said their experimental COVID-19 antiviral pill
failed to help patients with mild and moderate COVID-19 in a
study.
(Reporting by Anisha Sircar and Sruthi Shankar in Bengaluru;
Editing by Anil D'Silva and Bernadette Baum)
