Electronics giant’s outlook prompts selling; miners off in London
MADRID (MarketWatch) — European stocks rebounded from earlier losses on Monday, but gains were tenuous with shares of Philips Electronics trading lower on a weak outlook and with a failed joint-venture deal and downgrades hitting miners.
The Europe Stoxx 600 index (ST:SXXP 266.38, +0.55, +0.21%) was up 0.4% to 266.28, after closing up 0.1% on Friday.
U.S. stocks were pushing higher after opening on a weaker note, with Wall Street in the throes of a busy earnings day. Asia stocks finished mainly lower as the dollar recovered and softer commodity prices took a toll.
Investors mulled how much the markets have already priced in a second round of U.S. quantitative easing. Federal Reserve Chairman Ben Bernanke on Friday cemented views that further easing is coming, potentially at the next two-day policy meeting in early November, though he did not say so outright.
“There is certainly a sense that markets are finding the going a bit tougher and are not entirely convinced how to play what could be a very long two weeks between now and the result of the November FOMC meeting,” said analysts at FxPro in emailed comments.
“With the markets having pretty much convinced themselves that [quantitative easing] is coming once again, investors are more inclined to take some profits and remove risk positions ahead of the event, rather than be greedy,” they said. “It could be a long two weeks.”
Key stocks and sectors remained weak as major indexes fought to stay positive in Europe.
Shares of Dutch conglomerate Philips (PHG 31.91, -1.62, -4.83%) (NL:PHIA 22.78, -1.10, -4.61%) dropped 4.4% after it gave a cautious outlook on revenues for the fourth quarter. The decline came even as the firm’s third-quarter net profit beat forecasts. Read story on Phillips.
Victor Bareno, analyst at SNS Securities, said revenue growth was weaker than expected and flagged the company’s cautious view for sales in the current quarter. Still, he remains a buyer of the stock.
“Despite the weaker top line ... we still see drivers for solid growth in the core health-care and lighting units in 2011, and potential for further margin improvement,” said Bareno, in a research note.
The U.K.’s FTSE 100 index (UK:UKX 5,737, +33.86, +0.59%) moved up 0.4% to 5,723.53, as the benchmark overcame persistent pressure from the mining sector.
Shares of Rio Tinto PLC (RIO 64.90, -1.52, -2.28%) (UK:RIO 4,080, -63.00, -1.52%) fell 2% and BHP Billiton Ltd. shares (BHP 81.69, -0.72, -0.87%) (UK:BLT 2,181, -18.50, -0.84%) slipped 1.5%. The mining giants called off their proposed joint venture in Western Australia, citing strong regulatory opposition. See more on mining giants BHP and Rio Tinto canceling their proposed business tie-up
Downgrades also weighed on mining shares. Analysts at HSBC cut Xstrata PLC (UK:XTA 1,306, -6.00, -0.46%) and Antofagasta PLC (UK:ANTO 1,288, -19.00, -1.45%) to underweight from neutral and lowered Vedanta PLC (UK:VED 2,244, -44.00, -1.92%) to neutral from overweight.
“The market loves copper, but it is increasingly a momentum trade and the upside is compressing,” said the analysts. Xstrata fell 2.3%, Antofagasta sank 2.3% and Vedanta lost 1.8%.
Other mining stocks followed suit: Kazakhmys PLC (UK:KAZ 1,360, -24.00, -1.73%) traded down 1.3% and Randgold Resources PLC (UK:RRS 6,415, -150.00, -2.28%) retreated 2%.
On the upside, shares of BlueBay Asset Management (UK:BBAY 486.80, +111.10, +29.57%) jumped 30% after it agreed to be bought by Royal Bank of Canada (RY 55.08, +0.25, +0.46%) (CA:RY 55.91, +0.36, +0.65%) .
Tech stocks such as Autonomy Corp. (UK:AU. 1,415, +67.00, +4.97%) and ARM Holdings (UK:ARM 398.20, +10.20, +2.63%) rose by 4.2% and 3.1%, respectively, as U.S. markets awaited after-the-bell quarterly results from Apple Inc. (AAPL 316.36, +1.62, +0.51%) and International Business Machines (IBM 142.01, +0.95, +0.68%) .
The main German DAX 30 index (DX:DAX 6,515, +22.34, +0.34%) rose 0.4% to 6,519.71.
Shares of K S AG (DE:SDF 46.97, +0.52, +1.11%) added 1.1% after Norbert Steiner, its chief executive officer, reportedly told Frankfurter Allgemeine Zeitung that the company would consider any takeover offer.
Ratings moves also affected shares in France, where the CAC-40 index (FR:PX1 3,831, +4.03, +0.11%) was flat at 3,830.43.
Luxury-goods group PPR SA (FR:PP 115.80, -3.40, -2.85%) fell 2.8%, after S&P analysts reportedly cut their rating to hold from buy.
Shares of Carrefour SA (FR:CA 38.13, -0.38, -0.97%) dropped 1%, pulling back after Citigroup cut estimates while downgrading the retailer to a hold rating from buy and lowering its price target to 40 euros from 44 euros, in the wake of third-quarter earnings last week.
Carrefour trimmed its forecast for the year as it took more charges due to its Brazilian operations. “The Carrefour story is once again in ‘wait and see mode,’ ” a Citigroup research note said.
In Madrid, shares of Banco Santander SA (STD 13.26, +0.06, +0.46%) (ES:SAN 9.52, +0.04, +0.43%) rose 0.6% after the bank said state-owned Qatar Holding will buy $2.72 billion via convertible bonds in Banco Santander Brasil SA (BSBR 14.78, -0.27, -1.79%) , its Brazil unit. That stake represents 5% of the Brasil unit’s share capital.
