Europe: Retail stocks lag depressed European market on competition worries

[MILAN] Fresh competition worries hit Ahold and other European retail stocks on Friday with euro strength weighing on the broader market as speeches by central bankers at the Jackson Hole gathering in the US came into focus.

Ahold dropped more than 6 per cent after Amazon said it will cut prices on a range of goods as it completes its acquisition of Whole Foods Market.

Shares in the Dutch supermarket, which has a strong presence on the east coast of the US, fell as much as 7.6 per cent to their lowest level in 16 months, the biggest decline among European shares.

"Amazon's price cuts add to the price pressures that already exist in the US," said AFS Group analyst Jauke de Jong.

"About two-thirds of Ahold's revenue stems from the US, so the news is quite negative as it could need to follow suit by lowering prices as well to defend its market share," he added.

Gains among financials and energy stocks were not enough to support the pan-European Stoxx 600 index, which was down 0.1 per cent at its close, having spent the large part of the session in positive territory, while Euro zone blue chips also ended 0.2 per cent lower.

The Stoxx fell as the euro spiked and the dollar dropped back after Federal Reserve Chair Janet Yellen made no reference to US monetary policy in her speech at the Jackson Hole symposium.

Investors stayed cautious before ECB President Mario Draghi was set to deliver his speech after the market closed, even though no major new policy messages are expected.

"Draghi will certainly not breathe a word about the ECB's bond purchases program, which is due to end in September," said Ipek Ozkardeskaya, analyst at London Capital Group.

Ms Ozkardeskaya said she saw limited potential for European stocks before the ECB details plans to phase out its big bond purchase programme, likely at its September meeting.

"European equity funds redeemed US$231 million in the week to August 23, hinting that some investors may prefer to turn flat before the ECB's critical announcement," she said.

The retail index fell more than 1 per cent, leading sectoral fallers in the region. In the sector, French supermarkets Casino and Carrefour fell 1.7 per cent and 2.2 per cent respectively, while Tesco and Sainsbury were also lower.

Provident Financial led gainers on the Stoxx, up 22.5 per cent. The UK subprime lender, which has lost around half of its market value this week after a second profit warning in quick succession, said it had replaced the managing director of its beleaguered home credit business.

Fiat Chrysler rose as much as 2 per cent after saying it would evaluate any inquiries about potential tie-ups.

Fiat, however, ended the session 0.7 per cent lower, though it has gained nearly 16 per cent this week after China's Great Wall Motor said it was interested in possible deals with Fiat, sending shares in the Italian American carmaker to a fresh record high.

REUTERS