Europe: Shares dip as earnings roll in; autos down

[MILAN] European shares lost some ground on Wednesday as upbeat results from the technology sector failed to lift investor morale in a corporate earnings season seen as key if bourses on the continent are to end 2018 in positive territory.

The region's equities hit a 22-month low last week when jitters over rising US bond yields, geopolitical worries and signs of an economic slowdown rattled global markets.

After hitting a one-week high in opening deals, the pan-European Stoxx 600 benchmark index gradually declined and closed down 0.44 per cent.

The trade-exposed auto sector sustained heavy losses, down 1.9 per cent after Goldman Sachs said it viewed the third quarter as a challenging time for the industry.

Shares in Renault, Peugeot and Fiat Chrysler fell between 3.1 per cent and 4.6 per cent.

Disappointing results from Fresenius Medical Care, which sank 16.5 per cent, also weighed.

Yoghurt maker Danone also disappointed. Its shares fell 4.3 per cent after quarterly sales growth slowed sharply, reflecting falling sales of its infant formula products in China and troubles from a consumer boycott in Morocco.

"We still have a lot of uncertainty ... The situation is certainly not brilliant but probably not as bad as feared a few days ago," said Gerhard Schwarz, Head of Equity & Cross Asset Strategy at Baader Bank in Munich.

"We have seen a lot of profit warnings over the last couple of weeks but also some companies that stick to their guidance. If we manage to steer through the reporting season quite okay, then the markets too may get a lift," he said.

On the bright side, the technological sector shone, rising 0.5 per cent.

ASML shares rose 3.4 per cent after the Dutch equipment supplier to computer chipmakers posted a stronger-than-expected rise in quarterly earnings, easing worries over a slowdown in the semiconductor market.

ING analysts called the results "a very comforting update".

The company said demand for memory and logic chips remained healthy and it expected further growth in 2019. That helped to lift shares in other tech companies and sent their sectoral index up 1.8 per cent.

Overall, European third-quarter earnings are expected to rise 13.6 per cent, slightly down from the 14 per cent growth expected last week, according to Refinitiv IBES data, as analysts have been downgrading their forecasts.

Euro zone earnings growth forecasts have also fallen to 11.7 per cent from 12 per cent.

REUTERS