MW: Europe stocks drop ahead of central-bank meetings
Shares of UBS drop 5% after earnings miss estimates
By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — Earnings disappointment weighed Tuesday on European blue chips UBS AG and BP PLC, dragging their respective sectors south and leaving markets hard-pressed to carry on the rally of recent days driven by hopes for central-bank action this week.
The Stoxx Europe 600 index XX:SXXP -0.68% was poised to break a three-day winning streak as it slipped 0.3% to 263.09.
“We’re in a limbo phase right now, where we’re waiting for the outcome of meetings at the Federal Reserve and the ECB,” said Ryan Hughes, portfolio manager at Skandia Investment Group.
European Central Bank chief Mario Draghi “said last week that he would be do ‘whatever it takes’ to save the euro, and the market interprets that as a huge intervention in the bond market to demonstrate long-term confidence in the euro zone,” he added. “Markets are hopeful, but also skeptical, since the ability for central banks to disappoint has been so frequent.”
Swiss bank UBS CH:UBSN -6.22% CH:UBSN -6.22% CH:UBSN -6.22% posted one of the biggest losses in the pan-European index, off 4.9%, as second-quarter earnings fell short of analyst expectations. Profit for the quarter dropped 58%, dragged by a 349 million Swiss franc ($357 million) loss following Facebook Inc. FB +0.95% initial public offering. See: UBS profits disappoint amid loss on Facebook IPO and The Tell: Facebook just a sideshow for UBS: analysts .
Heavyweight oil producer BP PLC UK:BP -4.50% BP -4.38% fell 4.4% after adjusted second-quarter profit sank 96% as it took a massive write-down. See: BP adjusted profit sinks 96% on massive write-down.
Central bank meetings
Elsewhere, thoughts about upcoming central-bank meetings claimed investors’ attention, as hopes that policy makers in the U.S. and the euro zone would act to boost the global economy and curb the European debt crisis spurred a recent rally in equities. On Wednesday, the Federal Reserve will release its latest policy announcement, while the European Central Bank revels any potential easing measures or interest-rate cuts on Thursday. Read: Bold Draghi leaves room for ECB disappointment
Hughes from Skandia Investment Group said he didn’t expect a huge shift in monetary policy from the U.S. central bank, but rather that it keeps monitoring the situation.
“The data lately haven’t been consistent. The housing market is in some sort of a recovery and we see pockets of good news, but also disappointing data. If we didn’t have the housing market recovery, the Fed would probably act, but now I see it just waiting a little bit longer,” he said.
“That’s the difficulties that politicians have. They can talk about easing in theory, but it’s harder to enact any actions. Over the last 18 months markets have rallied on the talk, and then sold off on the action.”
Data out of the U.S. on Tuesday, painted a mixed picture as consumer spending fell for a second straight month in June, while personal income rose 0.5%. U.S. consumer spending falls in June; incomes up
U.S. stock futures pointed to a higher open on Wall Street.
On the European data front, figures on the currency area’s unemployment showed a steady rate of 11.2% for June, a euro-era high but unchanged from May’s upwardly revised figure. See: Euro-zone June jobless rate steady at record 11.2%.
Among country-specific news, seasonally adjusted data out of Germany showed that the number of unemployed German workers rose by 7,000 in July, while the unemployment rate remained unchanged at 6.8%. See: German July jobless rate unchanged at 6.8%
Index movers
German stocks bucked the negative trend across most of Europe, with the DAX 30 index DX:DAX +0.07% gaining 0.6% to 6,817.54.
Infineon Technologies AG DE:IFX +8.26% surged 9.1% after it said it would cut back sharply on investments planned for fiscal 2013 to safeguard operating margins. See: Infineon to cut investments to safeguard margins.
The country’s biggest retailer, Metro AG DE:MEO +2.71% , also helped lift the index. The stock gained 3.1% after Metro affirmed its full-year outlook, even as second-quarter earnings unexpectedly dropped. Read: Metro backs 2012 outlook, reports Q2 net loss.
Pharmaceutical and chemicals firm Bayer AG DE:BAYN +2.28% was also on the rise, adding 2.4% after it raised its full-year outlook due to strong demand for agricultural products. Read: Bayer lifts guidance, though provisions weigh on earnings.
Other pharma firms were also higher. Roche Holding AG CH:ROG +1.71% XE:RHO6 -1.96% gained 1.8%, while French drug maker Sanofi SA FR:SAN +1.72% rose 1.8%. The CAC 40 index FR:PX1 -0.42% was up 0.1% to 3,324.30.
Michelin FR:ML -2.17% added pressure in Paris, declining 2% after J.P. Morgan Cazenove cut the stock to neutral from overweight.
In the U.K., BP and banks weighed on the FTSE 100 index UK:UKX -0.45% , which lost 0.1% to 5,688.27. HSBC Holdings PLC UK:HSBA -1.68% HBC +1.45% shed 0.9%, while UK:STAN -1.93% Standard Chartered PLC UK:STAN -1.93% fell 1.2%.
Among other notable decliners, Anheuser-Busch InBev BE:ABI -3.52% BUD -0.01% lost 3.4%, as its closely watched earnings before interest, taxes, amortization and depreciation slipped below market expectations. See: AB InBev profit rises, boosted by Brazil .
Sara Sjolin is a MarketWatch reporter, based in London.
