European shares fall as bank stocks, subdued euro-zone growth data weigh

By Shubham Batra

(Reuters) -European shares fell on Friday as a drop in bank stocks offset optimism over positive earnings reports, while the euro zone growing at a lower-than-expected rate in the first three months of the year also weighed on sentiment.

The pan-European STOXX 600 index slid 0.5% and was set for its first weekly decline in six. Banking shares led declines among sectors on the index, down 2.5%, on track for second week of losses.

NatWest slumped 6.0% after the British bank reported a 20 billion pound fall in deposits in the first quarter.

“The earnings expectations in Europe remain more elevated than those in the U.S. Thanks to a pricing out of recession risks in Europe, data has been resilient on the macro front, certainly more resilient than most had expected at this point in the year,” said Karim Chedid, head of investment strategy for iShares EMEA, BlackRock.

Miners pulled the basic resources index down 1.1%, as Chinese demand showed signs of slowing.

SBB lost the most on the index, falling 11.8% after the Swedish real estate company’s first-quarter net asset value fell 17%.

Mercedes-Benz Group AG slid 1.8% after rising in early trade, as the luxury car maker lifted its outlook for the annual adjusted return on sales of its vans division.

Media shares were the top gainers on the index, rising 0.4%, recovering some losses from Thursday.

Topping gains on the index, Electrolux AB jumped 9.8% after the Swedish home appliances maker posted sales and operating loss in first quarter above market expectations.

Shares of some of Europe’s biggest drugmakers including Roche Holding AG, Novo Nordisk and GSK Plc rose between 0.5% and 1.2%.

Barring last month, when the collapse of two U.S. regional lenders sparked concerns of a global banking crisis, European stocks have risen around 9% in 2023 so far.

The euro zone grew only marginally in the first three months of 2023 and at a rate lower than market expectations after stagnation at the end of last year, preliminary data showed on Friday.

Gross domestic product in the euro zone expanded by 0.1% in the first quarter, below expectations in a Reuters poll for 0.2% growth. Compared to a year earlier, growth was 1.3% against expectations of 1.4%.

(Reporting by Shubham Batra in Bengaluru; Editing by Sonia Cheema and Rashmi Aich)