Europe's STOXX 600 pulls back from record high as investors weigh earnings, oil prices

Siemens AG

Yesterday 17:44

STOXX, Germany's DAX hit record highs in a first since August
Healthcare, consumer-facing sectors among top gainers this quarter
Luxury, auto stocks among top laggards for the quarter
Updates after markets close
By Johann M Cherian, Anjana Jayakrishnan Nair and Avinash  P
Nov 12 (Reuters) - Europe's benchmark STOXX 600 eased off a record high but still eked out a slim gain on Thursday, boosted by strong earnings and a rotation out of AI-linked stocks in Asia and the US.
The pan-European index .STOXX closed 0.14% higher at 664.01 points after touching an all-time peak of 666.58 points earlier, as oil prices edged higher. Germany's DAX .GDAXI added 0.4%, hitting a record high.
European equities have been supported by robust earnings this quarter, despite lingering inflation and further rate hike worries. Prices of oil, a key import for Europe, turned higher on Thursday, but remained below $100 a barrel.
"If we are able to get a truce and an agreement between the US and Iran, that will help lower energy prices, which in turn should help allow for an improvement of sentiment among the European consumer... that should help drive a broadening out of the European equity market," said Aneeka Gupta, equity strategist at WisdomTree. 
Siemens SIEGn.DE rose 1.7% after the industrial technology group raised its mid-term growth outlook.
     Adecco Group ADEN.S jumped 14.7% after reporting stronger-than-expected third-quarter operating income and pointing to improving hiring conditions for permanent roles.
Europe's smaller exposure to AI-linked stocks has also supported its outperformance versus Asian and US peers as investors increasingly question the sustainability of the AI trade amid stretched valuations, debt-funded spending and the prospect of tighter regulation following the Democrats' US midterm electoral sweep.
Investors have instead taken a liking to defensives, with European healthcare .SXDP and consumer-related sectors such as food & beverage .SX3P, travel & leisure .SXTP and retail .SXRP posting double-digit gains this quarter.
Energy .SXEP and chemicals .SX4P have continued to outperform on an annual basis, benefiting from higher commodity prices due to the Iran conflict.
"The European market is home to a different set of companies, with greater exposure to consumer-facing businesses, industrials and financials, and that has driven outperformance during a period when technology stocks have taken a bath," said Mark Preskett, senior portfolio manager at Morningstar Wealth Europe.
The STOXX 600 has risen nearly 5% so far this quarter, while the S&P 500 .SPX is down 0.2%. Societe Generale analysts said 13 of the benchmark's 20 sectors have outperformed the index since the US midterm elections.
However, not all sectors have shared in the rally. Luxury stocks .STXLUXP and autos .SXAP have been among the index's biggest laggards, down more than 17% each this year.
The luxury sector has been grappling with weakening demand in key market China, while automakers such as Volkswagen VOWG.DE and Volvo VOLVb.ST have seen some of the biggest hits to earnings this quarter on rising competition from Chinese electric-vehicle makers.
Concerns also prevail about higher government debt in countries such as France and Italy ahead of pivotal elections next year, which could test investor resilience.
In the US, Jensen Huang resigned as Nvidia NVDA.O, clouding the outlook for the AI powerhouse and the broader sector. European tech shares .SX8P fell 0.5%.

 (Reporting by Johann M Cherian, Anjana Jayakrishnan Nair and Avinash P in Bengaluru; Editing by Shilpi Majumdar and Alex Richardson)
 ((johann.mcherian@thomsonreuters.com))