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Europe: Shares sink, Micro Focus plummets


[LONDON] European shares fell on Monday ahead of a widely expected US interest rate hike, while earnings and M&A took centre stage with software company Micro Focus sinking and a bid for Hammerson boosting commercial real estate stocks.

Micro Focus dropped 46 percent to a three-year low after it cut its annual revenue forecast and its CEO quit. Revenue was hit by lower licence income and issues with its purchase of Hewlett Packard Enterprise assets.

The firm's shedding of nearly half its market value caused Europe's tech sector index to tumble 2.5 per cent, its worst fall since early February when global markets sank.

A scuppered cross-border commercial real estate deal also made waves on Monday, with Hammerson soaring 24 per cent to the top of the Stoxx 600 after saying it had rebuffed a takeover offer from France's Klepierre.

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The offer, which strategists said would have helped Klepierre gain a foothold in the UK market, valued Hammerson's shares at a 40.7 per cent premium to Friday's closing price.

Before today's surge Hammerson's shares were down 19.8 per cent year-to-date, making them attractive to potential suitors. The rejection sent Klepierre shares down 3.9 per cent.

"Klepierre owns and operates 100 shopping centres in 16 countries across Europe and the quality has been improved over the past 5 years, with the UK the missing part of the jigsaw (the same could be said of Unibail)," said Liberum strategists, referring to Klepierre competitor Unibail Rodamco.

Europe's main benchmark, the Stoxx 600 index, fell 1.1 per cent as investors held their breath ahead of Wednesday's US Federal Reserve meeting which marks the debut for new Fed Chair Jerome Powell, and a likely interest rate hike.

Declines accelerated in the afternoon as the UK's FTSE fell to a 15-month low after Britain and the European Union agreed on a post-Brexit transition which boosted sterling but weighed on the internationally exposed share index.

Disappointing results weighed on German consumer goods firm Henkel, which fell 2.3 per cent after it said the first quarter was off to a slow start due to delivery difficulties in North America.

While Hammerson's surge drove the European real estate sector index up 1.1 per cent to the top spot, tech stocks were among the worst performers.

Even before Micro Focus' dramatic drop, European investors'sentiment had been turning more cautious on the tech sector which has led stellar gains across global markets.

Unicredit analysts on Monday said they had downgraded the tech sector to 'neutral' and upgraded utilities to overweight, arguing investors should increase their share of defensive sectors with economic indicators at elevated levels.

German food processing machinery maker GEA Group gained 2.4 per cent after the firm said its CEO Juerg Oleas was to step down in April 2019 after more than a decade in office.

Sweden's Dometic fell 2.3 per cent after the recreational vehicle products firm was downgraded to"underweight" by Morgan Stanley, whose strategists said the US RV market is overheating.