European markets closed lower on Wednesday as investors reacted to a wave of corporate earnings and an unexpectedly high U.K. inflation report. The pan-European Stoxx 600 index fell 0.9%, marking its steepest decline of the year and retreating further from Tuesday’s record closing high.
Corporate Earnings Drag Down Sentiment
Dutch healthcare technology company Philips led losses, plummeting 11% after reporting weaker-than-expected sales growth for the fourth quarter, driven by a significant downturn in China. Analysts at Citi noted that Philips’ “underwhelming” 2025 guidance also weighed on investor sentiment.
British defense giant BAE Systems saw its shares dip despite posting record orders and higher annual profits, while mining firm Glencore slid 7% after reporting a 16% year-over-year drop in adjusted earnings in its preliminary annual results.
Meanwhile, HSBC, Europe’s largest lender, reported a pre-tax profit of $32.31 billion for 2024, narrowly missing analyst expectations. The bank’s net interest income dropped by $3.1 billion from the previous year, reflecting pressures from a changing interest rate environment.
Dutch tank storage company Vopak also took a hit, closing 7.4% lower after announcing a 7.7% year-on-year decline in full-year revenue to €1.32 billion ($1.37 billion), compared to €1.43 billion in 2023. Despite stable demand for storage infrastructure, weakness in chemical markets contributed to the revenue decline.
UK Inflation Exceeds Expectations
Adding to market concerns, the U.K.’s inflation rate climbed to 3% in January, surpassing the 2.8% forecast in a Reuters poll, according to data from the Office for National Statistics. Core inflation, which excludes energy, food, alcohol, and tobacco prices, rose to 3.7% from 3.2% in December—its highest level since April 2024. The data could challenge expectations of near-term interest rate cuts by the Bank of England.
Global Market Reactions
Asian markets mostly declined overnight, diverging from Wall Street, where the S&P 500 had closed at a record high on Tuesday. However, U.S. stock futures opened lower on Wednesday, with the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average all trading in negative territory. The Dow dropped 173 points (0.39%), while the S&P 500 and Nasdaq also saw declines, as investors weighed inflationary pressures and corporate earnings.
