Europe: Results drive sharp moves in stocks as euro weighs

[LONDON] European shares dipped on Thursday as a bond market sell-off and a stronger euro took the steam out of the breakneck New Year rally in equities.

Results drove the bulk of stock moves, with some disappointments weighing heavily.

The pan-European Stoxx 600 and euro zone equities ended the session 0.3 per cent lower, extending sharp losses in the previous session when jitters over a report that China was considering slowing purchases of US Treasury bonds spilled over into stocks.

A Chinese regulator on Thursday said the report might be"fake".

While the Stoxx was roughly flat for most of the morning session, the index dipped followed the release of minutes from the European Central Bank's December meeting showing that the ECB should revisit its policy message in early 2018.

"This is sooner than we had assumed and might mean that (the ECB) it will end its asset purchases in September rather than tapering over the last few months of the year," economists at Capital Economics said in a note.

The euro's rise following the ECB release put pressure on Euro zone indexes with Germany's DAX closing 0.6 per cent lower, while bond yields also rose.

Britain's FTSE 100, meanwhile, touched a fresh record and ended 0.2 per cent higher.

UK retailers Tesco and Marks & Spencer were among the biggest European fallers, however, after their Christmas trading updates disappointed, with consumers cutting down on non-essential items.

Europe's retail sector fell 1.3 per cent, while bank stocks, which had jumped on Wednesday as bond yields surged, extended gains to end 0.4 per cent higher.

Danish jewellery firm Pandora dropped nearly 11 per cent after the company said it expected profit margins to fall in the next few years and reported 2017 revenue below expectations.

Hexagon jumped up 5.8 per cent after its CEO was cleared of insider trading charges.

While it is too early in the season to fully determine what impact results are having, investors said earnings will be under particular scrutiny this year as the market hopes for another year of earnings growth.

"You didn't really have any earnings growth coming through since the euro zone crisis, it was a kind of Groundhog Day every year, but 2017 was a break from that effect," said Nick Davis, European income fund manager at Polar Capital.

"The earnings season will be quite important. If Europe can continue demonstrating earnings growth at index level as an asset class it will be very attractive."

In other big moves, the restructuring French telecoms and cable firm Altice tumbled 6.7 per cent, extending Wednesday's slide, after its US unit announced a US$500 million junk bond sale.

REUTERS