European shares subdued as investors weigh Middle East talks; Alstom tanks

European shares were subdued on Monday, pressured by declines in healthcare and energy, as investors weighed diplomatic efforts to end the ‌months-long Middle East conflict, while French train maker Alstom tumbled after cutting annual margin forecast. The pan-European STOXX 600 index was flat at 545.33 points at 0920 GMT.

The index's less exposure to AI stocks helped it outperform the US benchmark S&P 500 in October, with the healthcare sector logging its steepest monthly ‌gain of 14% since February 1987. The sector, however, eased 0.9% and led declines on the STOXX index on Monday. "Healthcare had some really ‌strong tailwinds that helped it along last quarter. The first one was the selloff in tech, which boosted its attractiveness because it's a real defensive sector and secondly, they have some really good earnings news," said Kathleen Brooks, research director at trading and investment platform XTB.

About 78% of healthcare companies have reported earnings above expectations this earnings season, outperforming the STOXX's ⁠54.2%, LSEG ​data showed. "We know that there are ⁠concerns in AI. The cracks have appeared. Even if there is a recovery, these healthcare stocks are exactly where you want to be right now," she said, adding that banks ⁠could also see tailwinds following the recent pullback.

Bavarian Nordic rose 3.2% after the vaccine maker secured a four-year contract from the British government for its vaccine against ​mpox and smallpox, and announced share buyback plans. Chip stocks such as Aixtron gained 2.4% and Infineon added 1.3%, recovering from a sharp ⁠selloff in the tech sector last week following disappointing results from US-based hyperscalers.

Alstom tanked 27% and hit a March 2024 low after the company cut forecast as execution problems on its ⁠Coradia Max ​platform in Germany dented half-year profitability. It also expects negative free cashflow for the year compared with a positive forecast earlier. Offering some respite, Iranian and Qatari officials held a third straight day of talks aimed at pushing for a deal to end the US-Israeli war on Iran. ⁠Brent Crude prices eased 4.2% and weighed on energy stocks, which have reported the strongest earnings growth of 139% in the third-quarter season.

Travel and leisure ⁠was the top sectoral gainer, ⁠up 1.7% on lower crude prices. Ryanair rose 2.1% on announcing cost cuts after reporting a 6% fall in net profit. Meanwhile, manufacturing activity growth held up well in October, albeit easing as new order growth slowed and ‌rising costs from energy ‌and supply-chain disruptions squeezed margins.