Europe: Dollar slump hits shares; Suez warning, tumbling tech weigh

[MILAN] A slump in the dollar hit European shares on Wednesday and dragged most of the continent's indexes into negative territory as Wall Street rose.

A decline in utility stocks following a profit warning at France's Suez and tumbling tech stocks weighed, while a strong update from Novartis provided some support.

The pan-European Stoxx 600 index closed down 0.4 per cent while Germany's DAX and the FTSE dipped 0.8 and 0.9 per cent respectively, with British shares also suffering from gains by sterling against the greenback.

The dollar fell to a three-year low after the US treasury secretary said he welcomed weakness in the currency and as investors worried about US President Donald Trump's protectionist agenda.

A weak euro or pound typically give an accounting boost to blue chips with revenues in dollars.

"This feels like the day that the dollar surrendered," said Pierre Martin, a senior sales trader at Saxo Bank.

In spite of Wednesday's dip, the Stoxx 600 remains close to its highest levels since August 2015. Investors have been lured into European equities by the region's economic recovery and expectations of continued earnings growth.

A survey on Wednesday showed euro zone businesses had a much better start to 2018 than expected, ramping up activity at the fastest rate since the middle of 2006.

Suez slumped over 16 per cent after the waste and water group revised down its 2017 earnings target due to additional costs in Spain and decisions to close services contracts in Morocco and India.

Bank of America Merrill Lynch downgraded Suez to"underperform" from "neutral." "We think Suez can start to turn around its fortunes post-2018 by aggressively increasing cost-cutting and pushing for organic growth," it said.

Its fall dragged peer Veolia down 3.8 per cent and sent the utilities index down 1.3 per cent.

Tech stocks fell even more, down 1.5 per cent after JP Morgan cut its rating for Apple supplier AMS to neutral, pointing to iPhone X order weakness.

AMS slumped 9 per cent, while Dialog and STMicro both fell more than 6 per cent.

Elsewhere among top fallers was Britain's Sage, down 6.4 per cent after a disappointing trading update.

Healthcare stocks in the black, boosted by a 2.7 per cent gain in heavyweight drugmaker Novartis.

The Swiss group forecast 2018 operating profit would grow faster than sales as revenue from drugs accelerates and it exits a period when patent losses dented results.

"We see the top line returning to robust growth in the fourth quarter ... pointing at a successful business turnaround for 2018," Baader Helvea analyst Bruno Bulic wrote, affirming his "buy" rating on the stock.

AP Moeller-Maersk was another strong gainer, up 3.1 per cent. Shares in the world's largest container shipping firm were supported by reports it is seeking a partner for its drilling unit, while a trader also cited an upgrade to "buy" at SEB Equities.

Shares in LSE Group surged in late trading and closed up 5 per cent after Sky News reported that activist hedge fund TCI predicted a 15 billion pound takeover bid for the exchange.

REUTERS