Europe: BT warning, poor earnings weigh on shares; Generali rallies

[LONDON] Europe's earnings season got off to a rocky start on Tuesday with profit warnings from BT Group and Aryzta sending their shares sharply lower.

The pan-European STOXX 600 index still managed to eke out a 0.2 per cent gain, though, propped up by Italian financials and mining stocks.

While basic resources was the biggest sectoral riser, boosted by a weaker dollar, Italian insurer Generali was the biggest individual gainer, jumping 8.2 per cent on talk Intesa Sanpaolo could make a bid for it.

Sources close to the matter said Intesa was considering a bid for Generali and that its two main foundation shareholders backed the move even if it could temporarily reduce dividends for the bank's current investors.

Italy's index was the standout performer, up 0.9 per cent as Generali's biggest shareholder Mediobanca also rallied 5.6 per cent. Intesa's chairman, Gian Maria Gros-Pietro, said the bank would not discuss Generali at a board meeting due on Friday but would focus on budget issues.

Intesa shares fell 4.4 per cent.

BT lost a fifth of its market value, hit by an Italian accounting scandal that has compounded a sudden slowdown in its British government work and forced the telecoms group to cut forecasts for the next two years.

Shares in the company tumbled by 20.8 per cent to 303 pence, their biggest ever one-day fall. "I think companies have been punished ... over the last year for misleading statements, for false accounting," Jonathan Roy, advisory investment manager at Charles Hanover Investments, said. "The worries are, is there anything else that isn't being managed as it should be?"

Swiss bakery firm Aryzta was the biggest faller, sliding 31.9 per cent after issuing a profit warning.

Budget airline easyJet was another top faller, down 8.8 per cent after reporting its first-quarter earnings. "While Q1 could be viewed as a positive start to the year we expect the fuel/currency impact (which is beyond the company's control) will weigh into the shares negatively (especially given the recent strong performance)," analysts at UBS said in a note.

A miss in fourth quarter earnings also weighed on Philips, which dropped 1.8 per cent. The medical equipment maker also disclosed a conflict with the US government over defibrillators it sold in 2015 and before.

REUTERS