Food producer Nestle reports higher profits; Nobel Biocare slides
By Sarah Turner, MarketWatch
LONDON (MarketWatch) -- European shares traded sharply lower on Wednesday, with miners and banks among the worst performers, as investors fretting about the pace and sustainability of the global economic recovery pared riskier asset positioning.
The Stoxx Europe 600 index (ST:SXXP 255.54, -4.39, -1.69%) dropped 1.6% to 255.74, extending a 0.9% loss made in the previous session and wiping out gains made so far this month.
The high-beta banking and basic resource sectors were both down more than 2% each as Santander (ES:SAN 9.84, -0.33, -3.20%) (STD 12.73, -0.78, -5.77%) shares fell 2.7%, UBS (CH:UBSN 17.39, -0.65, -3.60%) (UBS 16.60, -0.69, -3.99%) shares lost 3%, Rio Tinto (UK:RIO 3,272, -115.50, -3.41%) (RTP 51.30, -2.61, -4.85%) shares fell 2.5% and Xstrata (UK:XTA 1,016, -37.50, -3.56%) shares dropped 3.7%.
The losses came after the U.S. Federal Reserve said late Tuesday that "the pace of economic recovery is likely to be more modest in the near term than had been anticipated." It also announced moves that mean its balance sheet will not shrink at present. Read more on Fed.
"The rises in equities and the decline in U.S. yields over the past several weeks suggest that as recently as Monday investors were looking for significantly more aggressive action from the Fed," said strategists at Citigroup.
"While it is not clear how long this latest bout of risk aversion will last, it has been compounded by the fact that the latest round of Chinese data was not strong enough to reverse fears on a marked slowing of global growth," they added. Read more on China data. Read more on Japan data.
Of the regional European benchmarks, the U.K. FTSE index (UK:UKX 5,270, -106.58, -1.98%) lost 2% to 5,267.84, the German DAX index (DX:DAX 6,160, -126.33, -2.01%) fell 2% to 6,157.84 and the French CAC-40 index (FR:PX1 3,645, -85.72, -2.30%) fell 2.3% to 3,643.59.
Asian shares ended lower while U.S. stocks got off to a poor start after the U.S. trade deficit widened unexpectedly to a 21-month high in June.
The dollar gained against the euro (EURUSD 1.2967, -0.0209, -1.5862%) , with the common currency down 1.6% at $1.2964.
"A further decline in equities is likely to be associated with U.S. dollar strengthening as investors cut 'risk' positions," said the Citigroup strategists.
Metal futures mostly weakened although gold, often viewed as a safe-haven asset class, climbed $7.10 at $1,205.10 an ounce.
Gold producer Randgold Resources (UK:RRS 5,555, +115.00, +2.11%) (GOLD 86.50, -0.82, -0.94%) rose 1.1%, bucking the lower mining-sector trend.
Exporters were also notably weak in Europe, with Philips (NL:PHIA 22.85, -0.92, -3.87%) shares down 3.7%, Siemens (DE:SIE 75.37, -1.89, -2.45%) shares down 2.8% and BMW (DE:BMW 42.42, -1.06, -2.43%) shares down 2.1%.
Shares in Swiss human resources group Adecco (CH:ADEN 53.35, -2.25, -4.05%) declined 4.4%.
The company said it swung to a second-quarter profit of €97 million, from a loss of €147 million a year earlier. Revenue for the quarter rose 25% to €4.64 billion, driven by recent acquisitions.
"Strong second-quarter earnings aren't leading to upgrades. There are doubts about sustainability. Consensus is moving to a low growth scenario. The market is moving that way," said Ad van Tiggelen, strategist at ING Investment Management.
Other companies updating investors included Bank of Ireland (IE:BIR 0.83, -0.02, -1.78%) (IRE 4.50, -0.12, -2.60%) , down 3%.
Its first-half net profit fell 66% to 140 million euros ($185 million), hit by lower net interest income and losses on the sale of risky assets to a government bailout fund.
Swiss dental implant maker Nobel Biocare (CH:NOBN 16.81, -2.04, -10.82%) dropped 10.7% after its second-quarter net profit dropped 31% to €19.6 million, missing analyst forecasts.
Shares of German utility giant E.On AG (DE:EOAN 23.21, -0.27, -1.13%) fell 1% after the firm reported a 9% decline in first-half net profit to €3.91 billion, Read more on E.On results.
Its first-half net profit edged up to 5.45 billion Swiss francs ($5.19 billion) from CHF5.07 billion in the same period a year ago, beating analyst estimates. Read more on Nestle.
