UPDATE 2-Tempered Brexit hopes drag European stocks into red

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* British parliament votes on Sat after deal in Brussels
* FTSE gains as sterling rally fizzles out
* Ericsson's shares touch 3-month high after results

(Updates to market close)
By Sruthi Shankar
Oct 17 (Reuters) - European shares edged lower on Thursday,
as strong earnings from Sweden's Ericsson were offset by fading
optimism over the Brexit deal amid investor worries about its
support in the British parliament.
The pan-European STOXX 600 index .STOXX closed down 0.1%
after gaining as much as 0.9%, as investors initially cheered
news that the European Union and Britain had clinched a deal on
the terms of Britain's exit from the bloc. Shares in domestically focused British companies and Irish
firms, which have come to be seen as a barometer on Brexit
sentiment, gave up gains as the Northern Irish Democratic
Unionist Party (DUP) said it would vote against the accord at an
extraordinary session on Saturday. The FTSE midcap index .FTMC closed up just 0.16%, while
Irish stocks .ISEQ dropped 0.9% amid doubts over whether Prime
Minister Boris Johnson will be able to win the British
parliament's approval for any deal. "Unfortunately, it is too early. I wouldn't be taking any
direction at this point. It doesn't make sense to be taking
steps either way on sterling at this point," said Michael Bell,
Global Market Strategist at JP Morgan.
The pound saw wild swings, sending London's internationally
focused FTSE 100 .FTSE lower initially but the index closed up
0.2% with help from blue-chip firms.
France's CAC 40 .FCHI eased 0.4% after hitting a fresh
12-year high earlier, while Germany's DAX .GDAXI closed down
0.1%, although near its strongest level in over a year. An index
of eurozone stocks .STOXXE fell 0.2%.
"The deal should be seen as a better scenario for both sides
(Britain and the EU) than a no-deal...but Germany is sort of
stuck in a system where global trade is declining. It's a
similar situation for the rest of Europe," said Art Baluszynski,
head of research at Henderson Rowe.
Fears of a slide into recession continue to dog Europe and
not all earnings were upbeat, with Swiss banking software maker
Temenos TEMN.S tumbling more than 15%, its worst day in more
than five years, after traders said third-quarter core profits
missed expectations.
Swedish telecoms gear maker Ericsson ERICb.ST was a bright
spot, jumping 6% to hit a three-month high after posting
quarterly core earnings that were well ahead of expectations.
Shares of Finnish peer Nokia NOKIA.HE also gained
2%. "There was a consensus view on Ericsson that maybe they've
disappointed on the margins which was holding people back," said
Mark Taylor, sales trader at Mirabaud.
"But there's a lot of demand to get into the 5G theme, and
Ericsson's probably the biggest, most liquid name in Europe to
play that theme."
Nestle NESN.S was the biggest drag on the benchmark index
as organic sales growth dipped in the third quarter, outweighing
the announcement of a plan to buy back up to 20 billion Swiss
francs ($20.13 billion) in shares. Shares of Pernod Ricard PERP.PA fell 4.2% after the
spirits maker missed expectations for quarterly organic sales,
reflecting slower growth rates in China and India. French car
parts group Faurecia EPED.PA dropped 6.5% after posting
lower-than-expected third quarter sales. Wirecard's shares WDIG.DE , down over 2.5%, extended their
slide in the wake of an FT report alleging its effort to inflate
sales and profits. Shares in SAP SE SAPG.DE and Capgemini
CAPP.PA came under pressure after weaker results from U.S.
tech company IBM IBM.N .