Europe Movers: Babcock International, Capgemini, EssilorLuxottica, Hermes, Mercedes Benz

European markets extended weekly gains as investors reviewed the latest quarterly results from Hermes, EssilorLuxottica, Babcock International, and Mercedes Benz. 

The DAX index increased by 0.5% to 18,384.67; the CAC-40 index rose by 0.9% to 7,493.91; and the FTSE 100 index advanced by 0.8% to 8,253.60.

For the week, the DAX index gained 0.7%, the CAC 40 index fell 1.2%, and the FTSE 100 index advanced 1.4%. 

The yield on 10-year German bonds edged higher to 2.44%, French bonds inched higher to 3.13%, the UK gilts inched higher to 4.12%, and Italian bonds increased to 3.79%.

Hermes International SCA rose 2.9% to €2,066.0 after the French luxury goods maker said sales increased 13% in the second quarter, defying weak results from its peers. 

Babcock International soared 8.3% to 529.0 pence after the defense and aerospace company reported stronger-than-expected fiscal 2024 results. 

EssilorLuxottica jumped 8.3% to €208.90, and the Italian eyewear company reported better-than-expected first-half results. 

Capgemini SE declined 6.5% to €181.15 after the information technology service company revised its annual revenue outlook. 

The company estimated annual revenue to range between a decline of 0.5% and 1.5% from the previous estimate of an increase between zero and 3%. 

Mercedes-Benz Group was nearly unchanged at €62.95 after the German luxury vehicle maker lowered its annual profit outlook for its core passenger car unit. 

European Markets Extend Weekly Gains; Eurostar and SNCF Face Arson Attacks

European markets rebounded and extended their weekly gains as investors reviewed the latest batch of earnings. 

Market sentiment recovered after Hermes reported an increase in sales, EssilorLuxottica and Babcock International reported strong results, and Mercedes-Benz trimmed its annual outlook. 

Investors were unnerved after Eurostar canceled about 25% of its high-speed rail service following overnight arson and other "malicious attacks" ahead of the opening ceremony of the Olympic Games later this evening. 

SNCF confirmed in a statement that its railway network experienced several attacks early Friday morning, with several facilities and fiber optic lines damaged by fire. 

"This is a massive attack on a large scale to paralyze the TGV network," SNCF told AFP, adding that several train services may be canceled this weekend, affecting hundreds of thousands of travelers. 

Europe Indexes and Yields

The DAX index increased by 0.5% to 18,384.67; the CAC-40 index rose by 0.9% to 7,493.91; and the FTSE 100 index advanced by 0.8% to 8,253.60.

For the week, the DAX index gained 0.7%, the CAC 40 index fell 1.2%, and the FTSE 100 index advanced 1.4%. 

The yield on 10-year German bonds edged higher to 2.44%, French bonds inched higher to 3.13%, the UK gilts inched higher to 4.12%, and Italian bonds increased to 3.79%.

The euro edged lower to $1.08; the British pound inched lower to $1.286; and the U.S. dollar weakened to 88.27 Swiss cents.

Brent crude decreased $0.55 to $81.81 a barrel, and the Dutch TTF natural gas fell by €0.68 to €32.69 per MWh.

Europe Stock Movers

Hermes International SCA rose 2.9% to €2,066.0 after the French luxury goods maker said sales increased 13% in the second quarter, defying weak results from its peers. 

Babcock International soared 8.3% to 529.0 pence after the defense and aerospace company reported stronger-than-expected fiscal 2024 results. 

EssilorLuxottica jumped 8.3% to €208.90, and the Italian eyewear company reported better-than-expected first-half results. 

Capgemini SE declined 6.5% to €181.15 after the information technology service company revised its annual revenue outlook. 

The company estimated annual revenue to range between a decline of 0.5% and 1.5% from the previous estimate of an increase between zero and 3%. 

Mercedes-Benz Group was nearly unchanged at €62.95 after the German luxury vehicle maker lowered its annual profit outlook for its core passenger car unit. 

Nikkei Extends Two Week Losses to 11% Amid Rate Path Uncertainty, Tokyo Area Inflation Accelerates

Stocks in Tokyo extended losses for the eighth session in a row as investors unwind artificial intelligence-linked bets. 

Investors stayed on the sidelines ahead of the Bank of Japan's monetary policy decisions on July 31 amid rising optimism that the central bank may be ready to lift rates and significantly cut its government bond purchase plan. 

The Nikkei extended weekly losses to 5.1% and the Topix fell 2.9%, and both indexes fell for the second week in a row. 

Moreover, Tokyo area core inflation accelerated for the third month in July, the Ministry of Internal Affairs reported Friday. 

Core inflation, which excludes fresh food prices, increased to 2.2% from 2.1% in June as the ending of the government subsidy increased energy prices by 19.7% from a year ago. 

Food prices rose at a slower pace, and hotel price inflation weakened as the government ended its subsidies a year ago and demand from foreign tourists supported the price increase. 

Tokyo area inflation is seen as a leading indicator of nationwide trend, and Japan's consumer price data are scheduled to be released in about three weeks. 

A day ago, a survey showed service prices in June for businesses soared at the fastest pace in 33 years, stoking broader inflationary pressures. 

However, businesses are struggling to pass higher prices to consumers amid weak domestic demand. 

The yen continued to rally for the second week in a row and traded at 154.24 against the U.S. dollar in the hope that the central bank will start raising rates as early as next week and narrow the wide yield gap between the U.S. and Japanese bonds. 

Japan Stock Movers 

Japan stocks declined on Friday and extended weekly losses after losses in technology, shipbuilding, communication, and electric machinery led the decliners. 

The Nikkei 225 stock average declined 0.5% to 37,667.41, and the Topix index dropped 0.4% to 2,699.54. 

Tokyo Electron, Advantest, Renesas Electronics, Screen Holdings, and Lasertec declined between 3% and 6%. 

Hino Motors advanced 12.8% to ¥453.40, Canon gained 6.7% to ¥4,622.0, and Fujitsu Ltd. soared 10.9% to ¥2,700.0. 

China Markets Extend Weekly Losses Amid Weak Domestic Demand and Earnings Outlook

Stock market indexes in Shanghai and Hong Kong continued to look down amid weak market sentiment ahead of the Politburo meeting later in the month. 

The Hang Seng index and the CSI 300 index dropped 0.2%, and both indexes are set to extend weekly losses for the second week in a row. 

For the week, the Hang Seng index fell 2.4% and the CSI index dropped 3.4%. 

The People's Bank of China unexpectedly cut its one-year loan prime rate, the reference rate for property mortgage lending, by 10 basis points on Thursday. 

The surprise move underscored the need to support the fragile economic recovery with additional measures as the world's second-largest economy struggles to achieve the government's annual economic growth target rate of 5%. 

China's policymakers are showing little interest in supporting the property market rebound amid widespread overbuilding and shoddy construction. 

Policymakers are looking to provide assistance to companies pursuing advanced manufacturing, renewable energy, and modernizing military capabilities. 

With the shift in focus, Chinese leaders are not likely to announce financial market supportive measures, which requires additional spending, as the government is struggling with record high debt of 300% of gross domestic product, the highest among leading economies of the world. 

China Stock Movers 

The Hang Seng index increased 0.2% to 17,036.73 and the CSI 300 index rose 0.2% to 3,406.96. 

Tech and e-commerce stocks were in focus and traded volatile as investors worried about the upcoming earnings in the next few weeks. 

Tencent Holdings increased 1.3% to HK $354.80, Baidu decreased 1.1% to HK $87.79, Alibaba Group decreased 0.1% to HK $73.25, and Meituan added 0.7% to HK $107.80. 

BYD increased 1.2% to HK $237.0, and Li Auto jumped 1.4% to HK $74.20. 

Ugreen Group doubled on the first day of trading in Shenzhen to 42.50 yuan, and the consumer products company raised 1.5 billion yuan. 

India Movers: Ashok Leyland, Canara Bank, Sobha Ltd, Tech Mahindra, Texmaco Rail

India indexes erased weekly losses as investors reviewed the latest earnings update. Market sentiment has been weak after the central government proposed to increase capital gains and securities transaction tax rates. 

The Sensex index increased by 0.7% to 80,622.56, and the Nifty index rose by 0.8% to 24,602.90. 

On the Mumbai stock exchange, 236 stocks traded at their 52-week highs, and 12 stocks traded at their 52-week lows.

Canara Bank decreased 0.1% to ₹111.75, and the financial service company reported mixed results in the June quarter. 

Net interest income increased 6% to ₹9,166 crore from ₹8,666 crore, and net income rose 10.5% to ₹3,905 crore from ₹3,535 crore. 

Asset quality, measured by the percentage of non-performing loans, improved in the quarter from a year ago. 

The net non-performing asset ratio improved to 1.24% from 1.57% a year ago and eased to 1.27% in the March quarter. 

Total domestic deposits increased 11.5% from a year ago to 12.31 lakh crore from ₹11.05 lakh crore, and domestic gross advances rose 9.2% to ₹9.21 lakh crore.

Tech Mahindra Ltd. declined 1.1% to ₹1,513.10, despite the tech services provider reporting a surge in net profit in the June quarter. 

Revenue increased 10% to ₹13,005 crore and net income advanced 23% to ₹851.5 crore from a year ago, respectively. 

New contracts in the quarter increased to $534 million from $500 million in the previous quarter. 

The company's total staff increased by 677 from a year ago to 147,200. 

Ashok Leyland rose 6.3% to ₹247.0 despite the commercial vehicle maker reporting a decline in earnings in the June quarter. 

Standalone revenue increased 5% to ₹8,599 crore from ₹8,189 core, and net income declined 9% to ₹526 crore from ₹576 crore a year ago. 

Sobha Ltd. declined 3.1% to ₹1,804.85 on a report that a subsidiary of the Godrej family plans to cut its stake in the company by half through a block deal transaction. 

Anamudi Real Estates LLP plans to cut its stake in the company from 9% to 5% and raise as much as $100 million. 

Texmaco Rail & Engineering Ltd. increased 0.5% to ₹277.57, and the company agreed to acquire Jindal Rail Infra for ₹615 crore. 

U.S. GDP Growth Accelerated In Second Quarter

Gross domestic product expanded at an annual rate of 2.8% in the second quarter, adjusted for seasonal factors and inflation, and faster than the annual pace of 1.4% in the first quarter, the U.S. Bureau of Economic Analysis showed Thursday. 

Consumer spending accelerated to 2.3% from 1.5%, and the increase in private inventories added 0.82 percentage points to the economic growth in the quarter. Nonresidential fixed investment accelerated to 5.2% from 4.4%. 

On the other hand, residential investment contracted for the first time in a year by 1.4% from a rise of 16%, and international trade continued to drag on economic growth after imp76orts accelerated to 6.9% from 6.1%, faster than the increase in exports to 2% from 1.6%. 

Investor expectations are high that the Federal Reserve will slow inflation towards its target rate of 2% without causing a recession, despite multiple interest rate hikes over 2022 and 2023. 

A separate economic report showed, new orders for durable goods declined 6.6% from the previous month in June to $264.5 billion, after rising for four months in a row, the U.S. Census Bureau reported Thursday. 

Gross domestic product expanded at an annual rate of 2.8% in the second quarter, adjusted for seasonal factors and inflation, and faster than the annual pace of 1.4% in the first quarter, the U.S. Bureau of Economic Analysis showed Thursday. 

Consumer spending accelerated to 2.3% from 1.5%, and the increase in private inventories added 0.82 percentage points to the economic growth in the quarter. Nonresidential fixed investment accelerated to 5.2% from 4.4%. 

On the other hand, residential investment contracted for the first time in a year by 1.4% from a rise of 16%, and international trade continued to drag on economic growth after imp76orts accelerated to 6.9% from 6.1%, faster than the increase in exports to 2% from 1.6%. 

Investor expectations are high that the Federal Reserve will slow inflation towards its target rate of 2% without causing a recession, despite multiple interest rate hikes over 2022 and 2023. 

A separate economic report showed, new orders for durable goods declined 6.6% from the previous month in June to $264.5 billion, after rising for four months in a row, the U.S. Census Bureau reported Thursday. 

 

ServiceNow soared 13.4% to $832.03 after the company reported solid second-quarter results. 

Total revenue increased 22% to $2.6 billion from $2.2 billion, net income declined to $262 million from $1.04 billion, and diluted earnings per share fell to $1.26 from $5.08 a year ago. 

In the quarter a year ago, the company received a one-time tax benefit of $870 million. 

The company reported 88 transactions over $1 million in net new annual contract revenue, or ACV, in Q2 2024, a 26% jump from a year ago, adding to the company's large backlog. 

The remaining performance obligations, or RPO, increased 31% from a year ago to $18.6 billion.

The company revised its subscription revenue guidance to a range of $2.66 billion to $2.67 billion, from a prior range of $2.525 billion to $2.530 billion.

Chipotle Mexican Grill decreased 2% to $50.77 after the restaurant chain operator reported 

Revenue in the quarter increased 18% to $3.0 billion from $2.5 billion, net income advanced to $455.6 million from $341.7 million, and diluted earnings per share rose 32% to 33 cents from 25 cents a year ago. 

Comparable same-store sales increased 11.1%, and the company opened 52 new stores in 46 locations and one international licensed restaurant. 

The company reiterated full-year comparable restaurant same-store sales to increase in the mid- to high-single-digit range and open between 285 and 315 stores. 

During the second quarter, the company repurchased $151.4 million of stock at an average price per share of $63.52. 

As of June 30, $647.7 million was available under share repurchase authorizations, including an additional $400 million in authorized repurchases approved by the Board on June 5. 

American Airlines Group rose 1.4% to $10.32 after the international carrier issued a cautious outlook for the current quarter, citing lower fares because of overcapacity. 

Total operating revenue in the second quarter increased 2% to $14.3 billion from $14.1 billion, net income plunged 46% to $717 million from $1.3 billion, and diluted earnings per share fell to $1.01 from $1.88 a year ago. 

The company guided diluted earnings per share in the third quarter to be breakeven and in the full year to range between 70 cents and $1.30. 

Southwest Airlines increased 2.4% to $27.25 after the regional airline reported better-than-expected second-quarter results. 

Total operating revenue increased 4.5% to $7.4 billion from $7.0 billion, net income plunged 46% to $367 million from $683 million, and diluted earnings per share dropped to 58 cents from $1.08 a year ago. 

The airline warned that its revenue per average seat mile may fall and nonfuel costs may jump by as much as 13% in the current quarter from a year ago. 

Lamb Weston plunged 27% to $57.44 after the french fry maker reported a decline in revenue and earnings in its latest quarter. 

Revenue in the fiscal fourth quarter ending in May declined 5% to $1.61 billion from $1.69 billion, net income plunged 74% to $129.6 million from $498.8 million, and diluted earnings per share dropped to 89 cents from $3.40 a year ago. 

The food processing company estimated fiscal 2025 revenue between $6.6 billion and $6.8 billion, net income between $630 million and $685 million, and diluted earnings per share between $4.35 and $4.85. 

"The operating environment has changed rapidly over the past twelve months as global restaurant traffic and frozen potato demand softened due to menu price inflation continuing to negatively affect global restaurant traffic. 

This has resulted in an increase in available capacity in North America and Europe. We believe this supply-demand imbalance will persist through much, if not all, of fiscal 2025," said chief executive Tom Werner in a statement released to investors. 

Visa dropped 4.3% to $253.55 after the electronic payment network operator reported lower-than-expected revenue in the June quarter.  

Revenue in fiscal third quarter ending in June increased 10% to $8.9 billion from $8.1 billion, net income soared 17% to $4.9 billion from $4.2 billion, and diluted earnings per Class A share advanced to $2.40 from $2.0 a year ago. 

Payment volume jumped 7% and cross border volume rose 14% from a year ago, respectively. 

During the quarter, Visa repurchased 17.2 million shares of class A common stock at an  average cost of $276.75 per share for $4.8 billion, and about $18.9 billion are available for share repurchases as of June 30, 2024. 

The board of directors declared a quarterly cash dividend of $0.520 per share of class A common stock payable on  September 3, to all holders of record as of August 9. 

Alphabet dropped 3.9% to $176.49 after the parent company of Google reported better-than-expected quarterly results, but YouTube's revenue disappointed investors. 

Revenue in the second quarter increased 14% to $84.7 billion from $74.6 billion, net income rose to $24.6 billion from $18.4 billion, and diluted earnings per share increased to $1.89 from $1.44 a year ago. 

YouTube revenue increased to $8.6 billion from $7.6 billion, Google cloud revenue rose to $10.3 billion from $8.0 billion, and Google search revenue jumped to $48.5 billion from $42.6 billion a year ago, respectively. 

Tesla plunged 12.2% to $216.18, and the company reported a drop in its automotive unit sales declined for the second quarter in a row. 

Moreover, the company's discounts and financial incentives lowered its profitability. 

Revenue in the second quarter increased 2% to $25.5 billion from $24.9 billion, net income attributable to shareholders plunged 45% to $1.5 billion from $2.7 billion, and diluted earnings per share plunged to 52 cents from 91 cents a year ago.