Gains by cyclical sectors helped push European stocks higher on Thursday, while heavy losses in Dixons Carphone after a profit warning dominated early trading.
The pan-European STOXX 600 gained 0.3 per cent, in line with euro zone stocks and blue chips.
“With the December results some way off and Black Friday week (of retail discounts) looming, Dixons will be under pressure to provide additional detail on today's complex variables in coming weeks,” said Stifel analysts.
Dixons Carphone was the worst-performing among European retail stocks so far this year, even before Thursday's decline wiped a third off its market value. The index was down 0.5 per cent on the day as Dixons weighed.
Bank of America Merrill Lynch European equity strategist Ronan Carr said he didn't favour Europe's retail sector, partly because of its heavy skew towards British companies.
In general, results this quarter have seen investors punish companies that missed expectations particularly harshly, a trend which analysts put down to slowing macroeconomic momentum.
“Expectations caught up with what have been solid fundamentals and we are at a juncture now where some macro indicators have shown signs of topping out,” Carr said, pointing to dollar weakness as another headwind to European earnings.
Continued recovery
“The fundamentals are supportive of continued earnings recovery but there's a challenge from the currency,” Carr added.
Among individual stocks, the world's third-biggest building materials supplier CRH rose 2.8 per cent after selling its US distribution business to US firm Beacon Roofing Supply.
British sub-prime lender Provident Financial added to a recovery from its sharp falls earlier in the week, jumping 13 per cent.
Sunrise Communications gained 6.2 per cent after its second-quarter net income more than doubled and Berenberg raised the stock to a “buy".
Danish software firm Simcorp dropped 11 per cent after its second-quarter results missed expectations, with order intake down 22 per cent year-on-year.
“There's a risk that the tech sector could be a little over-owned,” said Carr, pointing to tech stocks consistently being an overweight in BAML's monthly fund manager surveys.
“And if we start to get negative results, in line with the theme that misses get punished more, I think we could see share price reactions being more severe,” he added.
The company's earnings season in Europe was drawing to a close, with almost 90 per cent of MSCI Europe companies having reported. So far, 55 per cent have beaten forecasts and 39 per cent have missed.
By comparison, more than two-thirds of companies reporting in the United States topped expectations.