The German share price index, DAX board, is seen at the stock exchange in Frankfurt, Germany, January 30, 2018. REUTERS/Staff/Remote
January 31, 2018
By Helen Reid
LONDON (Reuters) – European shares staged a partial recovery from a slump in the previous session as investors surveyed a mixed bag of results from some of the region’s biggest industrial names.
The pan-European STOXX 600 <.STOXX> gained 0.2 percent by 0830 GMT, in line with euro zone stocks. Britain’s FTSE 100 underperformed. Other country benchmarks were set to end the month on a positive note.
Results were center stage with some disappointments causing big share price drops, with investors particularly impatient with earnings misses in this high-valuation environment.
Ericsson <ERICb.ST> sank 8.5 percent after the telecom equipment maker reported a deeper than expected loss, and said the Chinese market would continue to decline.
Debt collector Intrum Justitia <INTRUM.ST> tumbled 9.4 percent after its fourth-quarter revenue and earnings missed expectations.
Shares in fashion retailer H&M <HMb.ST> fell 6.3 percent after the company said it would open far fewer stores in 2018 as fourth-quarter profit and profit margins fell.
“This time last year H&M guided to 10 to 15 percent sales growth in local currencies per year. The absence of such guidance this year is telling in itself,” said Liberum analysts.
It was another dark day for struggling UK outsourcer Capita <CPI.L>, and a pay day for short-sellers, with the shares down 40 percent after the company warned on profit, announced a rights issue and suspended its dividend.
Despite some disappointing results, investors remained optimistic on European equities.
“It’s been a very strong start to the year, and with that markets can always take a pause, but there is nothing from the earnings season so far that would not support a continued constructive view on the market,” said Britta Weidenbach, head of European equities at Deutsche Asset Management.
Year-to-date in 2018 European equity funds have registered the strongest inflows across all major regions, accounting for over one-third of global equity fund flows, HSBC found.
And despite yesterday’s pullback, Europe’s banks index <.SX7P> was on track for its best month in more than a year.
Electrolux <ELUXb.ST> led European gainers, up 7.2 percent after the home appliance maker reported a bigger than expected rise in fourth-quarter profit.
An order boom helped truck maker Volvo <VOLVb.ST> raise its outlook, driving the shares up 4.4 percent.
Finland’s Elisa <ELISA.HE> gained 5.9 percent after its results beat expectations.
In an early sign of the negative impact forex could have on some European firms, Infineon <IFXGn.DE> shares fell 0.7 percent, the worst-performing on Germany’s DAX, after the chipmaker slashed its revenue guidance due to the weak dollar.
“I think there will be selected companies with a potential negative impact from the dollar but the question is, is it a net negative, and what is the underlying story,” said Deutsche Bank’s Weidenbach.
Overall fourth-quarter earnings for the STOXX 600 are expected to increase 11.9 percent from Q4 last year, the latest Thomson Reuters data showed.
(Reporting by Helen Reid; editing by Tom Pfeiffer)
