European shares steady after selloff as luxury sector shines

Other luxury stocks including LVMH, Kering and Hermes rose about 3% each, lifting France's blue-chip CAC 40 index. ASML Holding NV gained 0.6% after posting better-than-expected quarterly profit and saying it expects sales growth of 20% in 2022.

European shares steadied on Wednesday after taking a beating in the previous session, as strong earnings updates from luxury majors Burberry and Richemont countered pressure from elevated U.S. and German bond yields.

The pan-European STOXX 600 index was flat after hitting a one-week low in the previous session. The U.S. 10-year Treasury yield held near two-year highs, while the German 10-year yield rose above 0% for the first time since May 2019 as investors braced for tighter U.S. monetary policy.

Investors are pricing in a much faster rate-hike cycle in the United States, while concerns persist over the pandemic's impact on supply chains, said Philipp Lisibach, chief global strategist at Credit Suisse. Economists polled by Reuters also expect euro zone inflation to burn hotter throughout 2022 than expected a month ago, which could pressure the European Central Bank to tighten policy once the Omicron wave passes.

"Fourth-quarter earnings are going to be decent, but it'll be important to understand how companies cope with higher input prices, particularly energy prices and wages," Lisibach said. STOXX 600 companies are expected to post a 48.6% year-on-year rise in fourth-quarter profit to 109 billion euros ($123.6 billion), a marginal uptick from a prior estimate of 48.5%, Refinitiv data showed.

Retail stocks jumped 2.2% and personal and household stocks added 1.9% on Wednesday, outperforming the benchmark, after a slew of encouraging earnings results. British luxury brand Burberry gained 5.9%, topping London's blue-chip FTSE 100, after saying full-price sales accelerated in the third quarter thanks to outerwear and leather goods as well as material improvement in Asia and Europe.

Cartier owner Richemont climbed 9.3% as the world's second-largest luxury group said robust demand for its jewellery and watches in the Americas and Europe helped quarterly sales rise by nearly a third. Other luxury stocks including LVMH, Kering and Hermes rose about 3% each, lifting France's blue-chip CAC 40 index.

ASML Holding NV gained 0.6% after posting better-than-expected quarterly profit and saying it expects sales growth of 20% in 2022.