European Stocks Slip Amid Uncertainties

By Paolo Laudani, Ankika Biswas and Johann M Cherian

(Reuters) – European stocks slipped on Tuesday as investors navigated uncertainties surrounding geopolitical issues and global interest-rate cuts, though a strong outlook from German company SAP helped cushion some losses in the tech sector.

The pan-European STOXX 600 index closed 0.2% lower, reducing early losses that had seen the index reach a two-week low.

Rising yields on benchmark German bunds pressured equities, leading to declines in utilities sectors.

The STOXX has seen record highs multiple times this year but has slipped further from those milestones as investors factor in stagnating economic growth and weak demand from China.

The International Monetary Fund has forecasted that Germany, Europe's manufacturing powerhouse, will experience zero growth this year, which may negatively impact broader eurozone performance.

Key factors to watch include the upcoming U.S. elections in November, uncertainty regarding the pace of Federal Reserve rate cuts, and ongoing geopolitical tensions that have driven investors toward the safe-haven U.S. dollar and gold.

Traders anticipate that the European Central Bank will lower borrowing costs by approximately 130 basis points by the end of 2025, as ECB President Christine Lagarde indicated that inflation in the eurozone might return to 2% sooner than previously expected.

Despite the overall gloomy outlook, SAP's shares rose 2.1%, boosting the tech sector by 0.9%, after the software company raised its full-year targets thanks to strong cloud business performance in the third quarter. This rise provided some cushion against losses in the German DAX, given that SAP comprises 15% of the index.

BofA global research analysts noted that while the long-term growth prospects, including opportunities arising from artificial intelligence, remain bullish, a degree of caution is prudent amid uncertainty.

Switzerland's main index fell 0.8%, with Logitech at the bottom, down 6.5% despite an initial surge of 3% following an increase in its full-year forecast.

Saab led the STOXX index with an 8.9% increase after exceeding quarterly operating earnings and confirming its annual outlook. Randstad, the world’s largest employment agency, reported quarterly profits slightly above expectations, causing its shares to rise 2.3% to a 2-1/2-year high. Norway's DNB, the largest bank, rose 5.7% after beating its third-quarter profit forecast.

Conversely, Eurofins, a laboratory testing company, dropped 11.5% after reporting nine-month growth below guidance, landing at the bottom of the STOXX 600. Munters in Sweden fell 11% after reporting a disappointing third-quarter performance that was below market expectations.