(Reuters) -European shares edged higher on Wednesday, recovering from their largest drop in nearly a month, as investors bought the dip, keeping an eye on political risks in France and awaiting
STOXX 600 Sees Minor Recovery as Investors Anticipate Nvidia Earnings
Market Overview and Key Influences
By Medha Singh, Sukriti Gupta and Purvi Agarwal
Political Risks in France
(Reuters) -Europe's STOXX 600 recovered slightly on Wednesday after a selloff in the previous session, as investors eyed political risks in France and awaited earnings from artificial intelligence chip leader Nvidia.
Impact of Nvidia Earnings
The pan-European STOXX 600 index closed up 0.1%, a day after registering its largest drop in nearly a month. Most other regional bourses, however, closed in the red.
Sector Performance Analysis
France's CAC 40 bounced back 0.4% from a three-week low hit in the previous session's selloff sparked by concerns over a potential collapse of Prime Minister Francois Bayrou's government next month.
Three main opposition parties said on Monday they would not back Bayrou in a confidence vote, which he announced for September 8, over his plans for sweeping budget cuts.
If the government falls, President Emmanuel Macron could name a new prime minister immediately, ask Bayrou to stay on as head of a caretaker government or call a snap election.
"A lot has already been priced in, especially for domestic names ... French banks, utilities, business services - but I would expect uncertainty to remain for the next few weeks," said Christophe Hautin, equity portfolio manager at Allianz Global Investors.
Investors are awaiting earnings from Nvidia, the world's most valuable company, for fresh cues on the AI trade, after a blistering technology stock rally hit a speed bump in August.
European corporate earnings have been resilient so far, with more than 52% of companies that have reported second quarter earnings till Tuesday, exceeding analysts' estimates.
"Investors want to assess to what degree tariffs and the uncertainty of the past few months have affected business confidence ... but the macro outlook for Europe looks pretty solid," said Nicholas Brooks, head of economic and investment research at ICG.
Heavyweight banks led sectoral losses, down 1.3%. Shares in Germany's Deutsche Bank and Commerzbank fell 3.4% and 4.9%, respectively, after a Goldman Sachs downgrade.
On the flip side, the personal and household goods sector gained 1.5%. Luxury stocks led the charge, with the broader index hitting a near one month high.
Swatch rose 6.3%, to top the STOXX 600, after the Swiss watchmaker's CEO said the company will be able to partly offset an impact from U.S. tariffs through price increases, analysts said.
DiaSorin fell 5.8%, the most on STOXX 600, after J.P. Morgan initiated coverage on the Italian medical diagnostics group at "underweight".
JD Sports rose 3.6% on signs of improving U.S. sales.
(Reporting by Medha Singh, Purvi Agarwal, and Sukriti Gupta in Bengaluru; Editing by Janane Venkatraman and Richard Chang)
