Telecoms, Lloyds a bright spot on a down day for European stocks

European Stock Markets

STOXX 600 down 0.6 pct. Lloyds, Glencore rise after updates. Telecoms results also a highlight. Bond yields still a worry

European shares retreated on Wednesday, under pressure from a continued rise in bond yields, though well-received results from telecom companies, bank Lloyds and miner Glencore helped limit the declines. 

Europe’s pan-European STOXX 600 index was down 0.6 percent by 0954 GMT, while Germany’s DAX also fell 0.7 percent. 

Another milestone in U.S. treasuries -- the two-year bill yield touched 2.282 percent, the highest since September 2008 -- was a fresh reminder to investors of the tightening rate environment that triggered recent sharp falls in global equities. 

Though telecoms gave up early gains to trade slightly negative, their 0.1 percent fall still outperformed the broader market after Telefonica Deutschland and Orange both signalled some relief from the heavy downward pressure on prices of recent years. 

Orange’s finance chief said the group remained available for consolidation talks in France. The comment failed to boost shares in its local peers, underlining the big obstacles to M&A in the sector.

Earnings updates from bank Lloyds and housebuilder Barratt Developments saw their shares rise. 

Glencore’s shares jumped 4 percent, helping the basic resources index rise into positive territory, following a set of full-year results its Chief Executive described as the miner’s “strongest on record”. 

Declines among European stocks were broad-based, however, with industrials and the more defensive health care and consumer staples sectors taking the most points off the STOXX 600. 

Around halfway through earnings season, more than half of MSCI Europe firms have either met or beaten analysts’ earnings expectations, with the bulk of beats concentrated in tech stocks and the energy sector.

Equity strategists at UBS said that the fourth quarter earnings season in Europe was “unseasonably strong” as earnings had been revised up, and not down. 

“Whilst attention has clearly been elsewhere over the last few weeks, given the correction in equities and sharp rise in volatility, the underlying earnings season has been quietly delivering the goods,” UBS equity strategists said in a note.