Europe Markets: European stocks struggle as HSBC, BHP Billiton updates disappoint

European stocks drifted lower Tuesday, with heavyweights HSBC PLC and BHP Billiton PLC issuing downbeat financial results as investors return to the markets after holidays in the U.S. and Asia.

Meanwhile, the losses in the euro picked up pace following a report that the European Parliament is planning to propose special-status relationship with Britain after the country exits from the European Union.

How markets are moving

The Stoxx Europe 600 index SXXP, +0.12% was down 1 point at 378.18 as the financial, basic materials and consumer services sectors fell, but the industrial and utility sectors moved up. On Monday, the benchmark lost 0.6% .

Germany’s DAX 30 index DAX, +0.06% was down nearly 6 points at 12,380.45, and France’s CAC 40 PX1, +0.23% picked up 0.1% at 5,260.10.

Spain’s IBEX 35 IBEX, +0.37%  gained 0.3% to 9,835.20, but the U.K.’s FTSE 100 UKX, -0.19% dropped 0.5% to 7,213.40.

Check out: More investors looking to cut U.K. assets as Brexit uncertainty persists

The euro EURUSD, -0.5481% bought $ 1.2351, lower than $ 1.2407 late Monday in New York.

In the fixed-income market, the yield on the 10-year German bund TMBMKDE-10Y, +0.38% was up 2 basis points at 0.748%, according to Tradeweb. Yields rise when prices fall.

What’s driving markets

European stocks started modestly higher Tuesday, but the gains were pared or they evaporated on major indexes as investors appeared hesitant to dive full-force into buying mode.

The lackluster mood matched that overseas, as S&P 500 futures ESH8, -0.65%  swayed between small gains and losses before the opening bell on Wall Street, where investors are returning after Monday’s Presidents Day holiday. In Hong Kong, stocks HSI, -0.78%  lost ground as trading resumed following the Lunar New Year holiday.

The euro was dropping against the dollar EURUSD, -0.5481%  and the pound EURUSD, -0.5481% following a Business Insider report that the European Parliament is preparing a resolution that will call for an “association agreement” with post-Brexit Britain, representing a break from the position held by chief European Union negotiator Michel Barnier.

Meanwhile, the U.K.’s Brexit minister David Davis was giving a speech in Vienna where he was expected to try to reassure European neighbors about the impact of the U.K. withdrawal from the EU.

What strategists are saying

“Overall, dealers are still cautiously optimistic about the health of European equities, and the acid test will be when the U.S. markets re-open,” said CMC Markets analyst David Madden in a note.

“The big move of the morning was in the normally somnolent EURGBP pair, which slumped as reports hit that the EU parliament was preparing it’s own plan for the UK-EU relationship, which would see the UK given special associate status,” said Chris Beauchamp, chief market analyst at IG.

“This kind of bespoke deal is exactly what the pair need, an acknowledgment of their shared history and mutual dependency,” Beauchamp said.

Stock movers

HSBC PLC shares HSBA, -3.50% HSBA, -3.50%  dropped 4.2% after the Asia-focused lender missed full-year profit expectations. The bank’s earnings were hit by the collapses of two borrowers: U.K. services and construction company Carillion PLC and South African retailer Steinhoff International Holdings SNH, -2.29%  .

BHP Billiton PLC BLT, -3.98% BHP, -2.44% BHP, -0.41%  was knocked down 3.5% as first-half profit before one-off items of $ 4.05 billion came in below the $ 4.21 billion consensus estimate in a Wall Street Journal poll of analysts. But BHP said it would raise its midyear payout by 38%.

InterContinental Hotels Group PLC shares IHG, -3.85%  slid 5.2%. The company, whose brands include Crowne Plaza and Holiday Inn, said “no additional capital return will be paid in calendar year 2018,” so it may focus on growth plans. IHG’s 2017 pretax profit was ahead of expectations and that it will raised its total dividend for the year.

Economic data

Economic sentiment declined in February but a less-than-anticipated pace, according to the widely watched ZEW survey. The economic sentiment measure came in at 17.8 points, down from 20.4 in January but ahead of an estimate of 16.

“About two-thirds of the survey participants expect the inflation rate in Germany and the entire euro area to increase in the next six months,” ZEW President Professor Achim Wambach said in a statement.

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