MW: Banks lead Europe stocks lower amid earnings woes
By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — European stock markets dropped on Friday, as investors digested the latest round of earnings on both sides of the Atlantic and also looked to developments in the euro zone after a two-day regional summit.
The Stoxx Europe 600 index XX:SXXP -0.62% fell 0.6% to 274.65, after reaching the highest level since June 2011 the prior day. On the week the index was poised to end 2% higher.
“People have been reassessing where there’s value in the market. When looking at European equities, you find fairly good companies that have been marked down in the past, but give good dividend yields. And now things are not as bad with the [European Central Bank] and [European Union] making progress,” said Frances Hudson, global thematic strategist at Standard Life Investments.
She said, however, that Friday lacked positive triggers from the euro zone to drive markets higher, with investors instead digesting earnings out of the U.S. so far, including disappointing results from Google Inc. GOOG +1.00% and Microsoft Corp. MSFT -1.65% .
“Earnings have in general been weaker than in the previous earnings season and we’re seeing weaker performance on revenue. You may have 61% [in the S&P 500 index] beating on earnings, but only 42% beating on revenue, telling us that what’s happening today is having an impact — we know trade between various countries hasn’t been as positive as it used to be,” she said.
U.S. stocks were trading lower on Wall Street.
Lackluster earnings reports also drove shares lower in Europe, with Aggreko PLC UK:AGK -8.34% surrendering 7.8% in London. The company said exchange-rate movements and increased bad-debt provisions likely will hurt full-year profit by 2.5%. See: Aggreko: Forex, provisions to impact FY profit
But Carrefour SA FR:CA +6.06% surged 5%, after the French food retailer said late Thursday it will sell its Colombian unit for 2 billion euros ($2.61 billion). See: Carrefour to sell Colombia ops to Cencosud at €2B
Developments in Brussels were in investors’ spotlight, as leaders concluded a two-day summit of the European Council.
The council wrapped up its first meeting Thursday night and said it has set a deadline of Jan. 1 to agree on a legislative framework for a single supervisory mechanism. See: Euro area sets supervisory legislation deadline
The leaders further said Greece has made good progress with implementing much-needed austerity measures, which could pave the way for the next tranche of bailout money. See: Euro area heads say Greece has made good progress
“The situation in Europe is still at a critical juncture, and even with the introduction on the banking supervision, much work has yet to be concluded,” Atif Latif, director of trading at Guardian Stockbrokers, said in emailed comments.
“Namely of concern is the ability to manage debt sustainability, the fiscal gap. Greece is trying to implement measures; on paper it seems doable but in reality many obstacles are ahead,” he added.
Europe banks lag, Burberry up
As the European trading week drew toward a close, shares in the banking sector weakened broadly.
In Frankfurt, Deutsche Bank AG DE:DBK -2.27% DB -2.37% lost 3.1%, while Commerzbank AG DE:CBK -3.72% dropped 4.6%.
The DAX 30 index DX:DAX -0.79% fell 0.7% to 7,387.84.
In London, shares of Barclays PLC UK:BARC -2.66% BCS -2.43% gave up 2.4%, while Lloyds Banking Group PLC UK:LLOY -3.01% LYG -3.92% dropped 2.8%, after J.P. Morgan Cazenove downgraded its rating to underweight from neutral, and Royal Bank of Scotland Group PLC UK:RBS -2.13% RBS -1.20% lost 1.7%.
Burberry Group PLC UK:BRBY +0.93% BURBY +1.19% bucked the trend, its shares adding 0.9%, as Investec Securities raised its rating on the luxury-goods firm to buy from hold.
The FTSE 100 index UK:UKX -0.36% traded 0.3% lower at 5,902.55.
