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European shares edged lower on Thursday as a rare dividend cut by oil major Royal Dutch Shell and a batch of mixed earnings reports soured the mood ahead of an update from the European Central Bank.
The STOXX 600 fell 0.3%, with shares in oil major Shell dropping nearly 6% after it cut its dividend for the first time in 80 years and suspended the next tranche of its share buyback programme amid a collapse in global oil demand.
Europe's oil & gas sector fell 1.3%, while banks took a hit after France's Societe Generale and UK's Lloyds Banking Group became the latest lenders to be hit by provisions against expected bad loans due to the coronavirus pandemic.
Danske Bank swung to a first-quarter net loss, sending its shares down 3%.
While Euro zone GDP numbers are due later in the day, data showed France saw its sharpest economic contraction since World War II in the first quarter, while Spain's economy shrunk by its biggest amount on record.
“Market at the moment doesn't want to focus on the bad news, but I don't think that will last forever,” said Daniel Grosvenor, director of equity strategy at Oxford Economics in London.
“Valuations have become extremely stretched and markets can't remain detached from the fundamental reality.”
European shares are on course to log their biggest monthly gain since July 2009 as signs of easing restrictions in several major economies and aggressive stimulus actions helped a recovery from a rout in February.
Stocks on Wednesday were also bolstered by positive developments regarding a potential COVID-19 treatment.
Investors will now turn to the ECB policy decision, due to be released at 1145 GMT. The central bank is under pressure to deploy even more firepower to prop up an economy that could shrink by a tenth this year.
Safran jumped 4.5% as the French aerospace supplier said it aims to maintain positive cash flow over the full year ”despite significant potential headwinds” from the health crisis.
Airbus gained 5% on news it was talks with the French government regarding possible aid.
UK's Reckitt Benckiser rose 3.8% as the consumer giant achieved record sales growth in the first quarter and predicted a stronger than expected performance in 2020 as customers stocked up essentials.
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