Royal Dutch Shell advances after reporting earnings; BBVA, Santander down
By Sarah Turner, MarketWatch
LONDON (MarketWatch) -- European shares were weak again on Wednesday, but some rebound in sentiment toward Greek and Portuguese stocks and solid corporate earnings pulled the market back from steep early losses.
The Stoxx Europe 600 index (ST:SXXP 260.00, -1.65, -0.63%) dropped 0.6% to 260.26, with financials under notable selling pressure, but traded off an early low of 256.19.
Of the main regional indexes, the French CAC-40 index (FR:PX1 3,812, -32.61, -0.85%) declined 0.7% to 3,819.16, the German DAX index (DX:DAX 6,121, -38.67, -0.63%) lost 0.6% to 6,121.38 and the U.K. FTSE 100 index (UK:UKX 5,613, +9.00, +0.16%) traded up 0.2% at 5,617.04.
Stocks plunged in Europe on Tuesday, and again in early action on Wednesday, as default fears were fanned by credit rating agency Standard & Poor's cutting Greece to junk status and also lowering Portugal.
Although Greece formally turned to Europe and the International Monetary Fund for financial aid last week as it grapples with its massive debt burden, details and timing of the 45 billion euro package have yet to be announced.
"It's a bit of a mess at moment while they decide [on Greek aid]. What the market hates most is uncertainty," said Oliver Russ, portfolio manager at Argonaut Asset Management. "The more they delay, the more nervous the market gets."
However, markets recovered some poise as the session progressed on Wednesday amid signs of progress on the package, with the president of the European Central Bank, Jean-Claude Trichet, saying a plan should be completed "within days" and the managing director of the International Monetary Fund, Dominique Strauss-Kahn, urging a speedy implementation.
Also, a European Commission spokesman told Dow Jones Newswires that the countries in the euro zone won't allow any nation in the region to default on their debt and there were also reports of a larger aid package for Greece.
"The IMF has faced plenty of these crises in the past, and they know how to wrap up a program and get the money out in time," wrote Erik Nielsen, chief European economist at Goldman Sachs.
The Greek securities regulator also banned short selling on Wednesday and the Greek ASE Composite index (XX:??? 1,697, -108.23, -6.00%) rose 1.7% to 1,725.53. National Bank of Greece (NBG 2.79, +0.19, +7.31%) shares were up 3.7%. See Greece story.
The euro (CUR_EURUSD 1.3200, +0.0036, +0.2735%) traded up 0.3% at $1.3222 against the dollar and the cost of insuring Greek and Portuguese debt against default narrowed.
Improved sentiment on peripheral European countries spread and Portugal's PSI 20 index (XX:PSI20 7,176, +23.38, +0.33%) rose 0.3% to 7,173.36 while Spain's Ibex 35 index (XX:IBEX 10,322, -159.20, -1.52%) came off early lows, trading down 1% at 10,375.00.
Although also off lows, Spanish and Portuguese banks were still weak amid bond market contagion worries, with Spain's Santander (ES:SAN 9.31, -0.19, -1.97%) (STD 11.96, -0.38, -3.08%) down 0.8% and Banco Comercial Portugues (PT:BCP 0.66, -0.01, -1.19%) down 1%. See related BBVA story. Read more on Greek bonds.
Financials are large holders of government bonds, said Russ. "If there is a bond default then that really does impact their earnings," he added. Read more on bank exposure.
Still, he noted that financials have already corrected quite strongly in Europe, with German insurance giant Allianz (DE:ALV 85.41, -1.54, -1.77%) down 1.4% on Wednesday, extending week-to-date losses to almost 5%. "There are opportunities but it does require at leap of faith," he said.
Some other companies managed to buck the downward trend in Europe after reporting earnings, with Royal Dutch Shell (UK:RDSA 2,053, +55.50, +2.78%) (RDS.A 62.21, +1.14, +1.87%) shares up 2.7%.
The oil major said its first-quarter profit climbed 57% to $5.48 billion, as oil and gas prices rose and production climbed 6% to 3.59 million barrels of oil equivalent a day. See Shell story.
Drug giant GlaxoSmithKline (UK:GSK 1,227, -11.41, -0.92%) (GSK 37.40, -0.16, -0.43%) climbed 1.2% after its first-quarter attributable profit rose to 1.34 billion pounds ($2.0 billion), from 1.13 billion pounds a year ago, and it said it has seen some early signs of recovery in its U.S. pharmaceuticals business.
Swedish bank SEB (SE:SEBA 47.52, +0.06, +0.13%) rose 3% after its first-quarter net profit fell 34% to 674 million Swedish kronor ($93 million) from 1.03 billion kronor in the year-ago period. Provisions for credit losses dropped 19% to 1.93 billion kronor.
Nordea Bank (SE:NDASEK 67.30, -2.20, -3.17%) shares rose 5.7% after the Stockholm financial services group, reported first-quarter earnings rose 2.6% to 643 million euros.
SAP (DE:SAP 36.13, -0.87, -2.35%) (SAP 47.48, -1.07, -2.20%) shares were down 1.9%. Its profit rose to 387 million euros, compared with 196 million euros in the year-earlier quarter. Revenue was marginally higher, at 2.51 billion euros compared with 2.4 billion. See SAP story.
