European stocks lose ground as earnings hold the spotlight; Diageo shares fall 6%

LONDON — European stocks edged lower on Thursday, as investors reacted to another flurry of corporate earnings.

The pan-European Stoxx 600 was down 0.3% as of 2:34 p.m. in London (9:34 a.m. ET), with most sectors and major bourses in negative territory.

It’s a busy day for earnings with quarterly reports from a slew of regional companies.

AstraZeneca held its guidance steady on Thursday morning, after reporting better-than-expected third-quarter revenues and profit. Total revenue, which jumped 10% year-on-year in the third quarter on a constant currency basis, is expected to rise by a high single-digit percentage this year, while core earnings per share are forecast to jump by a low double-digit percentage.

Shares fluctuated above and below the flat line since the opening bell, before advancing 3.2% by afternoon trade.

Speaking to CNBC’s “Squawk Box Europe” on Thursday morning, AstraZeneca CEO Pascal Soriot said the company had decided to keep its guidance unchanged as it was still grappling with headwinds in China and Latin America.

“We have a range in our guidance; we could end up in the top end of the range. We decided to be cautious and potentially overdeliver if everything goes well,” he said.  

Soriot also touched on relations with Trump in Thursday’s interview with CNBC.

“President Trump wants to rebalance the cost and risk of innovation in our industry … he wants to make sure that countries pay their fair share of developing medicines that can save lives,” he said.

“We understood this and we agree with that, so we’ve been pursuing a strategy of investing in the U.S. so we can manufacture all our products in the U.S., we’re investing in R&D in the United States, and we also agree the cost of innovation and the risk associated with it should be rebalanced across wealthy countries.”

German defense prime Rheinmetall, one of the major beneficiaries of this year’s bull run on defense stocks, was among the firms reporting on quarterly earnings on Thursday.

The company kept its guidance unchanged after reporting third-quarter sales of 2.78 billion euros, slightly below estimates. Operating profit came in at 360 million euros for the quarter, a year-on-year rise of almost 20%.

In the weapon and ammunition business, third-quarter sales rose by 190 million euros from the previous year to hit 691 million euros. Rheinmetall said the weaponry division had achieved record sales of 2 billion euros in the first nine months of the year, driven by orders from NATO member states and Ukraine.

Rheinmetall shares were last seen trading 1.2% higher.

Elsewhere, German logistics firm DHL also beat estimates in the third quarter, but CEO Tobias Meyer told CNBC’s “Squawk Box Europe” that the company had seen a significant decline in U.S. trading volumes.

DHL shares surged 8.7% in afternoon trade.

Meanwhile, shares of German lender CommerzBank fell 2.4% after the firm reported a surprise 7.9% year-on-year fall in net profit for the third quarter, coming in at 591 million euro ($680 million).

CEO Bettina Orlopp told CNBC’s Annette Weisbach that the profit miss was down to a booked tax effect. “We have a cost income ratio of 56%, which is three percentage points lower than last year’s number,” she said. The bank also incurred 553 million euros of restructuring costs earlier in the year.

Despite this, the bank said it now expects higher net interest income. It raised its full-year guidance to 8.2 billion euros, up from 8 billion euros.

Shares of drinks giant Diageo fell 6%, after the London-listed firm cut its full-year guidance, citing weakness in the Chinese and U.S. markets. The company said it still expected to take a $200 million hit from U.S. tariffs, as previously forecast.

Central bank decisions are also in focus in Europe on Thursday. Norway’s central bank held its key rate steady at 4% in a decision early in the day.

The Bank of England also held rates steady on Thursday, in a move that was widely expected ahead of the U.K.’s critical Autumn Budget. Yields on U.K. government bonds, known as gilts, fell across the curve, with the yield on the benchmark 10-year gilt shedding almost 3 basis points to trade at around 4.438% shortly after the BoE’s decision was announced.

The British pound, meanwhile, trimmed earlier gains and was last seen trading 0.18% higher against the U.S. dollar at $1.3073.

Taking a glance at global markets overnight, Asia-Pacific markets rose, tracking Wall Street gains after AMD’s third-quarter earnings beat lifted artificial intelligence stocks.

Meanwhile, U.S. stocks were slightly lower just after Thursday’s opening bell in New York as investors grew less wary of eye-watering AI valuations and were encouraged by the tone of a Supreme Court hearing on President Donald Trump’s sweeping tariffs.

Investors increasingly expect the Supreme Court to rule against the Trump administration’s aggressive trade policy after high court justices on Wednesday expressed some skepticism about the trade taxes’ legality at a hearing in Washington. The potential ruling would trigger a rollback of the president’s tariffs, likely pushing stocks higher.

— CNBC’s Liz Napolitano contributed reporting to this story.