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European shares fell slightly on Tuesday, a day after hitting their highest levels since 2015, with a sales warning from Danish jewellery maker Pandora and a glum forecast from wind energy company Siemens Gamesa weighing on the benchmark index.
The pan-European STOXX 600 index fell 0.03 per cent, although declines were capped by hopes that a US-China trade deal could be signed this month.
Healthcare, utilities and real estate stocks, commonly considered defensives, recorded some of the biggest losses in early trading.
“There is still optimism around US-China trade this morning, which is why we are seeing the rotation out of defensive sectors,” said Hubert de Barochez, markets economist at Capital Economics.
“But investors still want to see something concrete out of these discussions, even after the positive developments so far.”
The telecoms index fell 0.5 per cent, the most among the major European sub-sectors, dragged down by a 1.6 per cent fall in shares of Spanish telecoms group Telefonica, after it posted quarterly profit below analysts' forecast.
A strong start to the European earnings season and hopes of a resolution in the economically damaging trade war have helped European shares log a strong start to the month, with the STOXX 600 now inching closer to a record high hit in April 2015.
More than half of the European companies have already reported results, with most of them beating significantly lowered analysts' estimates.
But on Tuesday, Pandora fell 12 per cent and was on track for its worst day in more than a year as it warned of a steeper-than-expected fall in sales this year. The stock pulled the wider country index down 0.7 per cent.
German-Spanish company Siemens Gamesa tumbled 10.3 per cent to its lowest level since January after lowering its forecast for 2020.
In a bright spot, the chemicals sector rose 0.5 per cent after strong earnings reports by Dutch speciality chemicals company DSM and German chemicals group Evonik Industries.
Tariff-hit miners rose after reports that China was pushing US President Donald Trump to rollback more tariffs imposed in September as part of a “phase one” trade deal.
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