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Europe: Shares fall back after ECB-led euro spike hits exporters


[LONDON] European shares dropped on Thursday as a jump in the bloc's currency following the European Central Bank's policy meeting weighed on exporters, while disappointing updates prompted big moves on individual stocks.

The pan-European Stoxx 600 ended 0.4 per cent lower in a choppy session, reversing earlier gains as a spike in the euro dragged on export-oriented stocks.

The rally in both the currency and bond yields came after the ECB left its ultra easy monetary policy unchanged, and President Mario Draghi said that policymakers would discuss potential tweaks to its bond-buying programme in the autumn.

Europe's basic resources sector was the biggest faller, down 1.9 per cent, while export-heavy aerospace and defence firms and autos also came under pressure.

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A rising currency has become a concern for investors as the second-quarter earnings season rolls around, with strategists at Deutsche Bank warning that every 10 per cent move in the euro takes 5 per cent off the Stoxx 600's earnings.

The euro has gained nearly 11 per cent so far this year against the US dollar.

"Since Draghi recently joined several other central banks with a more hawkish sounding stance on the future of QE and interest rates, we have seen a sharp rise in both Euro area government bond yields and the euro relative to other major currencies," Jake Robbins, manager of the Premier Global Alpha Growth Fund at Premier Asset Management, said in note.

European banks were 0.4 per cent weaker, led lower by a 5.2 per cent drop in Nordea's shares.

The Nordic region's biggest bank by market value fell after reporting second-quarter operating earnings below analysts' estimates, while Danske Bank retreated 1.4 per cent after its quarterly earnings.

Germany's Lufthansa led the travel and leisure sector down with a 8.6 per cent drop, while British budget airline easyJet fell nearly 6 per cent after cautious comments on the outlook for summer pricing.

Swedish aerospace firm Saab dropped 5.5 per cent, its worst day in a year, after missing second-quarter forecasts.

But tech stocks were a bright spot, led higher by Ingenico Group which gained more than 5 per cent after the news that it is to buy rival Bambora for 1.5 billion euros (S$2.38 billion).

Jewellery maker Pandora was the biggest Stoxx gainer, surging more than 7 per cent after Carnegie upgraded it to "buy" from "hold", citing positives in its Chinese market.

Anglo-Dutch conglomerate Unilever rose 1.7 per cent after reporting slightly weaker than expected quarterly sales, but reaffirmed it was sticking to its full-year target.