European markets close mixed; Capita falls 47% after profit warning; H&M down over 10%

Key Points
  • The pan-European Stoxx 600 closed only slightly lower Wednesday afternoon, although the U.K. FTSE underperformed by 0.72 percent.
  • Britain's Capita tumbled to the bottom of the European benchmark on Wednesday after the outsourcing group cut profit forecasts again.
  • U.S. stocks were sharply higher in morning trade, rebounding from a two-day sell-off.

European markets closed lower Wednesday afternoon as investors digested corporate earnings and awaited the next policy decision from the U.S. Federal Reserve.

The pan-European Stoxx 600 closed 0.17 percent lower with business sectors pointing in different directions. While the French and German bourses ended Wednesday's trade close to the flat line, the U.K. FTSE dropped in afternoon trade to close 0.72 percent lower.

Europe's media stocks were the biggest gainers Wednesday afternoon, with the sector up over 0.6 percent amid news of several rating updates. Morgan Stanley announced it had upgraded its stock recommendation for Telenet to "equal weight" from "underweight" on Wednesday. The Belgian media firm gained throughout the day and was up nearly 3 percent at the end of trade.

Healthcare was the poorest performing sector, down 1.17 percent, but retail was also significantly into the red, 0.67 percent lower. Swedish clothing retailer H&M was the biggest laggard, with stock down 10.6 percent as the company's latest earnings report was accompanied by news that it had struggled to adapt to online retail.

Looking at individual stocks, Britain's Capita tumbled to the bottom of the European benchmark after the outsourcing group announced another profit warning. Two weeks after Carillion collapsed under a weight of debt, Capita said it would need to restructure after lowering its 2018 profit forecast 30 percent — or £120 million ($170 million). Its shares tanked 47.5 percent on the news.

Elsewhere, Banco Santander reported a 4 percent fall in fourth-quarter net profit from a year earlier. Spain's biggest lender said Wednesday that solid underlying results had been offset by extraordinary impairments in its U.S. unit. Its shares finished the day's trading up 0.9 percent.

U.S. stocks rebound

Stateside, stocks were sharply higher in morning trade, rebounding from a two-day sell-off on positive corporate earnings news. The Dow Jones industrial average briefly traded 261 points higher.

U.S. Federal Reserve Chair Janet Yellen is presiding over her last meeting in the top job Wednesday, although the institution is expected to leave interest rates unchanged.

In U.S. political news, President Donald Trump called on Republicans and Democrats Tuesday to work towards a compromise over immigration and infrastructure legislation in his first State of the Union address since assuming office.