Europe close: China worries, higher inflation dampen sentiment

(Sharecast News) - European stocks slipped on Friday as continuing worries over China's regulatory crackdown on tech stocks overshadowed upbeat earnings reports.
So too did a higher-than-expected reading on euro area consumer price inflation for July of 2.2% (consensus: 2.0%), although readings for second quarter GDP and June unemployment both came in much stronger than expected.

"Yet another week of strong earnings releases from the US, yet high expectations appear to be hindering the ability to maintain the ongoing uptrend," said IG senior market analyst Josh Mahony.

"Meanwhile, the rise of both inflation and growth in the eurozone has dampened sentiment somewhat given the potential implications for monetary policy."

The pan-European Euro Stoxx 600 index dipped 0.45% to 461.74, alongside a 0.61% drop for the German Dax to 15,544.39, while Spain's Ibex 35 gave back 1.26% to 8,675.5.

Shares in Asia-Pacific fell again on Friday, heading for their worst month since March 2020, as volatile trading continued for Chinese tech stocks.

Official preliminary data shoed the euro zone economy grew more strongly than expected in the second quarter as the bloc rebounded from a recession caused by the Covid-19 pandemic.

On a chipper note, gross domestic product in the single currency bloc grew 2.0% quarter-on-quarter over the three months to June.

That took the year-on-year increase to 13.7%. Economists had expected a 1.5% quarterly and a 13.2% annual increase.

In equity news, Intertek shares fell 8% as the company reported a rise in first-half profits but missed estimates.

Italy's UniCredit jumped 3% after posting higher-than-expected net profit, and said late on Thursday it had embarked on formal talks with the government over the possible acquisition of rival Monte dei Paschi di Siena. Monte dei Paschi shares were also higher.

French carmaker Renault fell 3% despite forecasting a full-year 2021 profit even as a global shortage in chips and rising raw material costs hampered car output.

British Airways-owner IAG fell 7% after it said summer capacity would rise to 45% of pre-pandemic levels but warned that significant uncertainty remained. Rival Air France-KLM rose after it unveiled narrower losses for the second quarter but a company executive said people are still reluctant to travel.

NatWest lost ground even as the bank resumed dividend payments, announced a share buyback and said it swung to a half-year profit. Investors are worried that profits have been boosted by cash reserved for debt defaults during the pandemic and wonder where future profits growth will come from, analysts said.

German healthcare group Fresenius retreated after it raised its 2021 earnings guidance but sounded cautious on new virus variants and stalling vaccination progress.

EssilorLuxottica gained 3% as the Ray-Ban maker raised its full-year guidance after revenue doubled in the second quarter.

Education publisher Pearson also rose 3% as the company posted higher interim profits and unveiled a new app for US college students to allow them access to text materials.