European shares pushed down as weak earnings weigh on markets

Reuters Updated - January 19, 2018 at 06:54 PM.

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European shares fell on Wednesday, hit by a drop in Swiss drugmaker Novartis and German chemicals company BASF after their weak earnings updates.

Royal Bank of Scotland also dropped after the bank warned its profits would be hit by a pension charge and US litigation provisions.

A forecast of lower revenues from iPhone maker Apple also hit European technology and chipmaker stocks such as ARM and Dialog.

The pan-European FTSEurofirst 300 index was down by 0.6 per cent, while the euro zone’s blue-chip Euro STOXX 50 index fell 0.8 per cent.

Novartis fell 3.2 per cent after its fourth-quarter core net income missed expectations, while BASF declined by 1.8 per cent after issuing a profit warning.

“We’re only just getting under way on the European earnings front, but it’s been a pretty mixed bag so far with weak updates from Novartis and BASF,’’ said Clairinvest fund manager Ion-Marc Valahu.

Italy’s FTSE MIB equity index also fell 0.8 per cent, even though Italy reached a deal with the European Commission to help Italian banks sell some of their €200 billion of bad loans.

A Milan-based trader said that while the deal on the Italian banks’ bad debts was a step in the right direction, the mechanics on how it would work were unclear and could be costly for the banks.

The pan-European FTSEurofirst 300 index had risen 0.9 per cent on Tuesday, helped by a rebound in oil prices although oil prices fell back again on Wednesday.

Concerns about a slowdown in China, the world’s second-biggest economy and a major consumer of oil and metals, have hit world stock markets this year, while worries about oversupply have also pushed oil prices to their lowest level in more than 10 years.

Germany’s DAX, which was down 0.4 per cent, remains some 20 per cent below a record high reached in April 2015. Both the DAX and FTSEurofirst are down nearly 10 per cent since the start of 2016.

“I’d be looking to sell into rallies on the stock markets until this oil price stabilises,’’ said Hantec Markets’ analyst Richard Perry.

Published on January 27, 2016 09:30