European and Asian stock markets tumbled Wednesday following a disappointing batch of corporate results in the United States and Europe.

The slump came after US electric car giant Tesla -- one of the "Magnificent Seven" stocks that have fuelled a global rally this year -- reported a drop in second-quarter profits.

Asian markets finished lower while European equities were down in early afternoon deals. Wall Street had also finished in the red on Tuesday, before the results were announced.

The Paris CAC 40 retreated by almost one percent, with shares in luxury giant LVMH retreating by almost four percent after it posted a 14-percent drop in net profit in the first half of the year.

The Frankfurt DAX was also in the red, shedding 0.6 percent, with Deutsche Bank sinking almost five percent after it reported a loss of 143 million euros ($155 million) in the second quarter.

London's FTSE 100 was down less than 0.1 percent.

"It is hard to see how the rally in markets can continue for now after several weaker than expected earnings reports including Tesla, LVMH and the US postal service," said Kathleen Brooks, research director at trading platform XTB.

The latest corporate results "have led to concerns that stocks will fail to deliver the boost to earnings that would spur the next leg of the rally", she added.

Traders are also treading cautiously as they weigh the outlook for US policy post-election, with Democratic chances boosted by the expected nomination of Kamala Harris to replace President Joe Biden to battle Donald Trump in November.

Equities have largely been boosted this year by growing expectations that the Federal Reserve will cut interest rates thanks to slowing inflation and a softening of the labour market.

The prospect of a more welcoming borrowing environment has heavily benefited tech firms, particularly as they have invested massively in AI, seeing it as the next big money-spinner.

But the shine was taken off Tuesday by Tesla's report showing profits fell 45 percent in the second quarter owing to price cuts and aggressive AI investment.

Payments behemoth Visa's reported revenue for its fiscal third quarter came in below estimates, though a forecast-beating report from Google-parent Alphabet did provide some support.

Alphabet and Tesla are part of the so-called Magnificent Seven tech kings that have been key to driving gains in markets that have pushed Wall Street to multiple record highs in 2024.

The others -- Apple, Amazon, Facebook-parent Meta, Microsoft and Nvidia -- are due to report over the next few weeks.

"The first view on Big Tech earnings wasn't inspiring," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

"Two of the Magnificent Seven stocks failed to create euphoria when they reported their second quarter results yesterday. The less-than-ideal set of earnings comes at a time when investors are questioning whether the AI rally has gotten ahead of itself," she said.

Investors are also awaiting later this week the release of key US economic growth data and the latest reading on personal consumption expenditure -- the Fed's favoured gauge of inflation -- which could play a role in decision-makers' thinking ahead of their next meeting.

- Key figures around 1130 GMT -

  • London - FTSE 100: DOWN less than 0.1 percent at 8,163.55 points
  • Paris - CAC 40: DOWN 0.9 percent at 7,528.96
  • Frankfurt - DAX: DOWN 0.6 percent at 34,523.13
  • Euro STOXX 50: DOWN 0.7 percent at 4,882.67
  • Tokyo - Nikkei 225: DOWN 1.1 percent at 39,154.85 (close)
  • Hong Kong - Hang Seng Index: DOWN 0.9 percent at 17,311.05 (close)
  • Shanghai - Composite: DOWN 0.5 percent at 2,901.95 (close)
  • New York - Dow: DOWN 0.1 percent at 40,358.09 points (close)
  • Euro/dollar: DOWN at $1.0840 from $1.0855 on Tuesday
  • Pound/dollar: DOWN at $1.2905 from $1.2907
  • Dollar/yen: DOWN at 154.46 yen from 155.62 yen
  • Euro/pound: DOWN at 84.00 pence at 84.08 pence
  • West Texas Intermediate: UP 1.0 percent at $77.71 per barrel
  • Brent North Sea Crude: UP 0.9 percent at $81.71 per barrel