Europe: Retail stress roils stocks, no Christmas boost in sight

[LONDON] European shares tumbled on Monday when a profit warning from online fashion retailer ASOS sent retail stocks into nose-dive as investors fretted that consumers were failing to deliver the traditional pre-Christmas spending boost to markets.

Euro zone stocks were down 1 per cent while Germany's DAX fell 0.8 per cent and Britain's FTSE 100 lost 0.9 per cent.

ASOS shares plunged 37.5 per cent after the British retailer - a favourite of investors keen to back internet-focused retail - cut its forecasts, saying November was "significantly behind expectations".

It was the latest in a string of profit warnings and negative outlooks from retailers including Sports Direct, Dixons Carphone and Bonmarche highlighting poor performance in the pre-Christmas trading period.

Europe's retail sector fell 2.6 per cent and closed to its lowest level since July 2016.

Shares in Zalando, a German rival of ASOS and Europe's biggest online retailer, dropped 11.6 per cent, the biggest Stoxx 600 fallers.

ASOS peer Boohoo fell 13.7 per cent after it reported record Black Friday sales.

Swedish retailer H&M fell 8.5 per cent despite reporting in-line sales figures, as the ASOS stress spread. Next and Marks & Spencer fell both 4.6 per cent.

Outside retail, M&A drove some big moves with Ingenico tumbling 7.4 per cent after it said it had dropped talks over a possible deal.

Sopra Steria and Worldline fell 11.4 per cent and 6.8 per cent respectively after Morgan Stanley lowered its rating on the stocks.

Swedish electrical components maker Dometic fell 5.3 per cent after Kepler Cheuvreux cut their rating on the stock to a "hold" from a "buy".

Leading euro zone stocks and Britain's FTSE 100 were all set for their worst quarter since 2011, when the region was in the throes of the sovereign debt crisis.

Investors smarting from a tough year also had a week of central bank events looming with meetings of the US Federal Reserve and the Bank of England likely to move markets.

Despite this, Mark Haefele, chief investment officer for Global Wealth Management at UBS, said: "On balance, we are not yet convinced that the profitable thing to do is to position for further policy errors or poor sentiment upending the economy."

He concurs with the Fed's assessment that the risk of a recession in the next 12 months is only around 20 per cent, and sees global equities as "reasonably valued". Valuations across global stocks have fallen as a result of recent market turbulence.

REUTERS