MW: Europe stocks weighed by Philips; Fed in focus
Hennes & Mauritz falls 2% after results; FOMC in focus
MADRID (MarketWatch) — European stock markets fell on Wednesday, led by a 10%-plus fall in shares of Philips Electronics N.V. after a profit warning, as investors looked beyond a confidence-vote win by Greece’s government to a U.S. interest-rate decision due later.
Adding to earlier losses, the Stoxx Europe 600 index XX:SXXP -0.60% fell 0.7% to 267.80, after a gain of 1.4% in the prior session.
Shares of Philips Electronics NL:PHIA -12.43% PHG +2.36% tumbled 11%, making it by far the biggest decliner on the Stoxx 600, after the group warned of weaker-than-expected demand in its lighting and consumer-lifestyle units. Philips also said it will announce company-wide cost cutting plans soon. Read about Philips.
Investors were cautious, with U.S. stock futures also lower, ahead of a decision due later by the Federal Open Market Committee. A press conference to follow from Fed Chairman Ben Bernanke will be closely watched for clues as to when to expect tighter U.S. monetary policy.
The Greece ASE Composite index GR:GD +0.24% rose 0.6% after Prime Minister George Papandreou won a crucial parliamentary vote of confidence in a late-night vote. It was a slim win, though, with news agencies putting the final tally at 155 to 143. Read about Greece.
Europe stock markets had rallied on Tuesday on expectations the Greek government would get by, but analysts said the country is hardly out of the woods with another vote on austerity measures looming next week.
Cameron Peacock, market analyst at IG Markets, added that “the fact that some just see this as delaying the inevitable fact that the euro zone is broken beyond repair, equities may well struggle to progress any further in the near term.”
Other peripheral markets such as the Spain IBEX 35 index XX:IBEX -0.29% fell 0.4% and the Portugal PSI 20 index PT:PSI20 -0.91% dropped 0.8%.
Shares of Swedish retailer Hennes & Mauritz AB SE:HMB -2.75% fell 2.8% after the company reported a 2.2% rise in second-quarter sales and net profit slipped 18% owing to a stronger Swedish krona and higher sourcing costs.
But analysts were looking on the bright side. “The second quarter came in 3% above our estimate and in line with consensus. Not super exciting but still a relief following three consecutive shortfalls,” said analysts at Deutsche Bank in a note to investors.
“We think that H&M will start to surprise on the upside from the third quarter, which should improve the sentiment which is as poor as it ever has been in the last decade,” the analysts said, saying that is largely due to what they expect will be a higher gross margin.
The German DAX 30 index DX:DAX +0.04% was flat at 7,284.69, with shares of drug maker Merck KGaA DE:MRK -1.19% down 2.3% after the company said it will no longer pursue global approval of its Cladribine Tablets for the treatment of relapsing-remitting multiple sclerosis. Merck said data from ongoing clinical trials are “very unlikely to address the FDA requirements and will not provide a basis for approval.”
The France CAC 40 index FR:PX1 -0.30% fell 0.4% to 3,862.64, with shares of French retailer Carrefour SA FR:CA -1.67% down 1.5% after Moody’s Investors Service on Tuesday cut the short-term credit rating of the company to negative from stable, and changed the outlook to negative from stable.
Moody’s said the decision mainly reflects Carrefour’s recent warning over profit at its French operations for the first half of 2011, saying a decline in earnings in that market “could have a fairly material impact on earnings in the current year.”
Clean energy shares fall; banks stumble in London
Shares of Spanish wind-turbine manufacturer Gamesa Corp. Tecnologia SA ES:GAM -2.00% led a decline for clean-energy companies across Europe. Shares of Gamesa fell 3%, while Vestas Wind Systems AS DE:VWS -2.54% dropped 2.9% and Renewable Energy Corp. ASA NO:REC -2.60% slipped 1.5%.
Pressure picked up for the FTSE 100 index UK:UKX -0.43% , off 0.6% to 5,743.06 with banks leading the decliners after HSBC downgraded shares of Lloyds Banking Group PLC UK:LLOY +9,893% , Barclays PLC UK:BARC -2.61% BCS -3.31% and Royal Bank of Scotland Group PLC RBS +1.19% UK:RBS -1.13% to neutral from overweight, saying proposed regulatory reforms from the Independent Commission on Banking could mean a hit of up to 10 billion pounds ($16.2 billion) for the three U.K. banks. Read more on HSBC's downgrade
Asset managers in London, meanwhile, tugged in the other direction owing to a crop of upbeat broker comments. Shares of Man Group PLC UK:EMG +4.21% jumped 3.9% after Credit Suisse lifted shares to outperform from neutral.
Shares of Schroders PLC UK:SDR +1.06% rose nearly 3% and Henderson Group PLC UK:HGG +10,083% rose 2% after each were upgraded to buy from hold at Citigroup. Read also London Markets
