Europe: Shares mark fourth week of gains; Ericsson shines

[MILAN] European shares held steady on Friday at the end of a strong week as a rally in commodities softened, although strong earnings updates boosted shares in Ericsson and Telia.

The pan-European Stoxx 600 index ended the session flat in per centage terms but remained up 0.7 per cent on the week, its fourth straight week of gains, as global markets recovered from a turbulent first quarter.

Jitters over possible trade wars, faster rate hikes in the United States and a regulatory crackdown on big tech groups sent the Stoxx to 14-month lows in March.

But since April the index has been on a recovery path as those worries receded and investors were lured back into equities by cheaper company valuations.

While moves were largely muted at the index level on Friday, Ericsson surged 17.5 per cent and posted its biggest one-day gain since October 2002 after the Swedish mobile equipment maker reported first-quarter earnings and its gross margin above market expectations as cost savings from job cuts started to kick in.

Its gains drove shares in rival Nokia up 2.4 per cent.

"The big jump in profitability provides evidence that Ericsson's efforts at cost reduction, addressing loss making contracts and investing in R&D is paying off," Liberum analysts led by Janardan Menon said in a note.

However, they confirmed their 'hold' rating on the stock, saying overall operating margins continued to be low in an unpredictable industry environment.

Cost-cutting has been a key driver for earnings growth in Europe and could also help first quarter results. Companies on the MSCI EMU index are expected to see earnings rising around 15 per cent in dollar terms last quarter.

Elsewhere, dovish remarks overnight from Bank of England Governor Mark Carney weakened the pound, helping the internationally exposed FTSE index outperform with a gain of 0.5 per cent. The index weathered a 2.8 per cent fall in Reckitt Benckiser following another poor update that further stresses gloomy prospects for consumer goods makers.

Shares in Shire were the worst FTSE performers, down nearly 4 per cent after Botox maker Allergan walked away from a bid for the rare-disease drugs specialist.

On Friday, Japan's Takeda increased its offer for the rare-disease drugs specialist to 47 pounds-a-share. Shire has rejected Takeda's previous three offers.

Back in earnings, Telia was an outstanding gainer, up 8.6 per cent, after the Nordics telecoms group announced a welcome share buyback plan as first-quarter core earnings slightly topped market expectations.

But ASM International dropped 8.4 per cent after the supplier of wafer processing equipment for the semiconductor manufacturing industry reported a bigger than expected fall in gross margins.

Shares in Metro were the biggest fallers, down 10.8 per cent after the German retailer lowered its earnings outlook due to weak performance at its Russian operations.

Oil stocks, which have gained 2.6 per cent this week, were a weak spot on the day as the price of oil fell after US.

President Trump criticised Opec for artificially high prices.

REUTERS