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Apple suppliers dent European shares as rally flags

[LONDON] European shares steadied on Wednesday as a global equity rally flagged, with Apple suppliers hit after the new iPhone release disappointed with a later than expected shipping date.

The pan-European Stoxx 600 index ended flat, paring earlier losses thanks to gains in oil and banking stocks which offset the weak chipmakers and a fall in miners.

Chipmakers supplying to Apple were among the worst performers, with AMS down 3.9 per cent, while Dialog Semiconductor slipped 1.6 per cent, while STMicro ended up 0.1 per cent.

Traders said their shares were under pressure because Apple's new $999 iPhone X will ship later than expected, on Nov 3. The price tag could also dent demand for the device in markets such as China.

Market voices on:

"With the iPhone coming in around US$1,000 it will be interesting to see how healthy demand is," said Mike Bell, global market strategist at JP Morgan Asset Management.

"If it's relatively healthy I think it shows that there is still quite a lot of pricing power for US companies and that consumers have confidence."

Chipmakers have been the best performing among Europe's tech stocks this year, accounting for a large chunk of the sector's outperformance. AMS shares have gained 165 per cent year-to-date.

Richemont fell 1.2 per cent despite reporting a sales beat for its first half thanks to a recovery in the Asian luxury market. UBS analysts said weaker retail growth may weigh on sentiment.

Peer Swatch also fell 3.9 per cent, with some traders citing concerns that Apple's new watch could also dent the watchmaker's shares.

The merging eyewear and lens makers Luxottica and Essilor were also among the biggest fallers, both down more than 2 per cent. EU antitrust regulators were set to tell the firms of concerns they have over the merger this week.

Covestro rose 3.7 per cent after German drugs and pesticides group Bayer sold a 9.4 per cent stake in the firm, in order to finance part of its acquisition of Monsanto.

European stocks were struggling for a further boost after sinking 7 per cent over the summer months.

"Our view is that European equities still have potential for upside," said JPMAM's Bell.

"The earnings outlook is quite strong still; Europe has among the highest operating leverage of any major market so if the global economy remains strong that should drive margin expansion and earnings growth."