Europe midday: Shares extend losses as retailers start to feel the heat

European shares extended losses at midday on Thursday after US equities were sold off on the back of poor earnings from retailer Target and Britain's Royal Mail warned of cost cuts and price rise.

The pan-European Stoxx 600 index was down 2.27%, having fallen 1% in the previous session. All major regional bourses were lower and US futures indicated no sign of a let up to the gloomy sentiment.

US markets were jolted after a big profit miss from retail chain Target, following rival Walmart the day before, which cut its profit guidance as consumers started to rein in spending.

Asia markets were also weaker overnight, with Chinese tech stocks lower after Tencent also missed on profits.

“With consumer spending power expected to be eroded further through interest rate rises, the worry is that Target’s pain is a precursor for yet more struggles to come for retailers,” said Hargreaves Lansdown analyst Susannah Streeter.

“A trend also seems to be emerging of people wanting to save their dollars to spend on experiences like holidays rather than homewares with luggage at Target selling fast.”

In equity news, Royal Mail shares fell as the UK letter and parcel carrier said it would be looking for £350m in cost cuts to cope with rising fuel and labour costs.

Homeserve shares soared as Canada’s Brookfield Asset Management has agreed to buy the London-listed emergency home repairs group in a £4.1bn deal.

Shares in French care home operator Orpea fell sharply after a report from France Info radio stated there was evidence pointing to potential financial irregularities linked to the company's Swiss unit.

Royal Mail tanked 13% after reporting higher operating profits but said it would have to make £350m in cost cuts as fuel and wage bills looked set to grow amid surging inflation.