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Europe: Margins in focus as results drive big swings in European stocks


[LONDON] Europe's main share benchmarks rose marginally on Friday but company results including Sweden's Elekta and France's Sopra Steria drove big swings in stocks as investors awaited news from crucial US-China trade talks.

The STOXX 600 and Germany's DAX were up 0.2 and 0.3 per cent respectively, with the main action at the share level.

Sopra Steria topped the STOXX 600, up 17.8 per cent after the French IT services and consulting firm reported full-year results and said it was targeting an improvement in margins this year.

"This should help ease concerns of on-going pricing pressure as the worst seems to be behind us now following the profit warning in Q3 2018," said Georgios Kertsos, an analyst at Berenberg.

Chipmaker ASM International jumped 11.9 per cent after it said fourth-quarter order intake hit a record high of 301.6 million euros (S$461.9 million), well above its forecast.

Its strong results bucked a trend of weakness in a semiconductor sector hit by trade tariffs and slowing global car demand.

Swiss construction chemicals maker Sika also rose 4 per cent after full-year profit beat expectations.

Elekta brought up the rear with a 13.5 per cent slide after the Swedish radiation therapy equipment maker reported third-quarter earnings well below market expectations, and cut its full-year margin forecast.

Margin pressure has been a broader theme across European shares this earnings season, with the gap between revenue beats and earnings beats growing as companies face rising costs.

According to UBS strategists this gap has reached an eight-year high.

Elsewhere the food and beverage sector was the worst-performing, down 0.8 per cent, after US-based Kraft Heinz reported weak results.

AB Inbev fell 3.6 per cent, Nestle lost 0.9 per cent and Danone dipped 0.5 per cent. Unilever also dropped 1.6 per cent.

Kraft Heinz and AB InBev share a stakeholder: 3G Capital.

RBC analysts said that "given overlapping ownership between the two companies and similar cultures of margin maximisation, we wouldn't be surprised if investors make some connection."

In other results, Saint Gobain shares fell 1.6 per cent after the company reported a slump in annual net profit, blaming asset impairments amid uncertainty over the economy.

French meal vouchers firm Edenred jumped 5.3 per cent after reporting record 2018 earnings and sounding a confident note about growth this year.

In the UK, M&A livened up trading. Dairy Crest shares surged 15.3 per cent after Canada's Saputo bought Britain's largest dairy food company for about 975 million pounds (S$1.7 billion).


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