Banks and Vodafone weigh on European stocks
LONDON, July 22 (Reuters) – European shares fell on Tuesday, led by Vodafone, which sank after issuing a weak outlook, while banks were weighed down by disappointing earnings from American Express.
By 0826 GMT, the FTSEurofirst 300 index of top European shares was down 1.4 percent to 1,153.72 points.
Telecoms and technology stocks took a hit after both Vodafone and Ericsson disappointed investors.
Vodafone shed 15.6 percent after the world’s largest mobile phone company by sales released in-line figures for the first-quarter but spooked investors by saying it expected full-year revenue to be around the bottom of its previously stated range due to economic weakness.
Peers Deutsche Telekom, Telefonica and KPN all fell between 4.6 and 7 percent.
Ericsson slumped 9 percent as it beat expectations with its second-quarter report, but also unveiled hefty restructuring charges and according to analysts disappointed in terms of profitability.
Peer Nokia lost 2.4 percent, while chip makers Alcatel-Lucent and ASML and STMicroelectronics fell between 2 and 3.8 percent.
AMERICAN EXPRESS HITS BANKS
Among sectors, banks were the biggest drag on the index.
The DJ Stoxx European banks fell 3 percent with Deutsche Bank, Credit Suisse and HBOS all down between 1.8 and 2.6 percent.
Belgian-French financial services group Dexia fell 9 percent after Moody’s Investors Service said it might cut its top rating for Dexia’s insurance division.
U.S. credit card issuer American Express overnight released a steeper-than-expected 38 percent drop in quarterly profit as it set aside more money to cover credit losses.
“I just think good news doesn’t appear to make the front pages at the moment,” Mic Mills, a risk trader at TradIndex said.
Auto stocks also underperformed following a bearish note from Morgan Stanley, which downgraded supplier Michelin to “underweight” from “overweight”.
In a note to clients, the broker says European automotive stocks have some “40 percent downside to trough on price/sales,” and advised investors to avoid stocks “where share prices are temporarily elevated by M&A”, pointing to VW, Continental and Porsche.
Continental bucked the negative trend, adding 0.4 percent after Schaeffler raised its takeover offer for the group to 70.12 euros from 69.37 euros per share.
SLICK OILS, SUEZ SURGE
Oil stocks were in demand as crude climbed back above $131 a barrel in morning trade. Total, Shell and BP all advanced between 1.7-2.2 percent.
“Everyone is looking at hurricane Dolly, which may create a bit of havoc,” Mills added.
In utilities, newly merged entity GDF Suez started trading in Paris, falling 3 percent.
Suez Environnement, the water and waste company spun off by Suez as part of the GDF merger, surged almost 40 percent on its debut. Veolia Environnement tracked its peer higher, adding 6.6 percent.
TomTom soared 12 percent after the navigation device maker beat analyst expectations with its quarterly sales and operating profit.
The news prompted Societe Generale to raise its stance on the stock to “hold” from “sell”, while Rabobank upped its recommendation to “buy” from “hold”.
UBS, which has a “buy” stance on TomTom, highlighted its earnings per share of 0.42 euros, well above the 0.27 euros seen by the broker.