Wednesday, 19 Jun 2024

Europe shares dip, earnings disappointment weighs

LONDON (Reuters) – European shares ended a choppy session lower on Tuesday, failing to benefit from a positive open on Wall Street as they buckled under the weight of disappointing earnings and data showing the euro zone economy grew less than expected in the third quarter.

The leading euro zone stocks index .STOXX50E was down 0.1 percent, while Germany’s DAX .GDAXI fell 0.4 percent and Britain’s FTSE 100 .FTSE climbed 0.1 percent.

Among the factors weighing on morale was the euro zone’s quarterly growth slowing to 0.2 percent and signs of distress in Italy highlighting concerns that the bloc’s third-ranked state is becoming one of its weakest links.

A fresh batch of third-quarter results did little to lift spirits.

“There were disappointing profits from Lufthansa as well as Beiersdorf and Reckitt, which together are not a good look,” said Mike van Dulken, head of research at Accendo Markets.

Geberit (GEBN.S) shares fell 9.3 percent after the Swiss plumbing supplies provider cut its sales outlook and said it was more cautious about the building industry.

UBS analysts said sales had slowed to “near stagnation” and that Geberit’s margin is “not fully resilient to wage/raw material inflation and FX”.

Lufthansa (LHAG.DE) shares tumbled 8.1 percent after the German airline missed profit estimates for the third quarter and said it would raise its number of flights more modestly than peers this season.

It was the latest airline to warn of higher fuel costs biting into profits.

“A slight shortfall in the Q3 results could be forgiven but we expect attention to focus on deteriorating trends in unit revenues and unit costs,” wrote Liberum analysts.

Beiersdorf (BEIG.DE), which owns cosmetics brands Nivea and La Prairie, fell 2.2 percent after sales missed expectations and its rival Reckitt Benckiser also reported weaker sales.

BNP Paribas (BNPP.PA) shares were bottom of the CAC 40, down 2.8 percent after France’s biggest listed bank reported weaker-than-expected third-quarter revenues, blaming its corporate and investment banking arms and its European retail banks.

Its fixed income, currencies and commodities segment saw its lowest performance since 2013, Jefferies analysts said, due to low rates activity and a “cautious approach to FX”, particularly in emerging markets.

Denmark’s Jyske Bank (JYSK.CO) was bottom of the STOXX 600, down 10.8 percent after its profit missed expectations.

Analysts have cut their earnings expectations for banks – the worst-performing European sector this year – to the lowest since February, 2016.

Strong earnings from BP and Volkswagen were the bright spots, helping limit losses. A beneficiary of higher crude costs, BP (BP.L) jumped 2.2 percent after the oil major’s profits soared to a five-year high.

Volkswagen (VOWG_p.DE) rose 3 percent after the carmaker’s profit beat forecasts – bucking the trend in the autos sector hurt by slower car sales and more stringent anti-emissions regulations.

Genmab (GEN.CO) was another strong gainer, up 6 percent after positive results for a phase 3 MAIA study of its Daratumumab drug.

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