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Europe: Stocks resume their slide a tech tumbles, Renault slumps
[LONDON] European shares resumed their slide on Monday to end at a three-week low as tech stocks came under fresh selling pressure on worries over Apple's iPhone demand and as carmaker Renault sank after the arrest of its CEO for alleged financial misconduct.
The pan-European Stoxx 600 opened up 0.6 per cent but flagged rapidly and ended the day down 0.7 per cent, its fourth straight day of losses. The current bear market has made it increasingly hard for indexes to hold on to early gains.
With the earnings season petering out, management issues, broker notes and M&A were the main drivers of the market.
Renault was the top faller on the Stoxx 600 after its CEO Carlos Ghosn, who is also chairman of the car maker's Japanese partner Nissan, was arrested in Japan on allegations of under-reporting his salary.
The dramatic fall for one of the best-known figures in the global car industry raised questions among investors about the future of the alliance, sending Renault shares down 9.4 per cent to their lowest level since October 2014. Mr Ghosn could not be reached for comment.
"It is hard not to conclude that there may be a gulf opening up between Renault and Nissan," said Bernstein analyst Max Warburton, raising the prospect of a potential "re-Japanization" of Nissan and the end of the alliance.
The fall, the biggest since Britain's vote in 2016 to leave the European Union, wiped about US$2 billion off the company's market capitalisation.
Tech stocks were the biggest sectoral fallers, down 2 to a 20-month closing low, with the sector hit by a slide in Apple shares on concerns about iPhone demand.
A report by the Wall Street Journal said Apple had cut production orders in recent weeks for all three iPhone models launched in September.
Apple suppliers ams, Infineon and BE Semiconductor fell between 0.2 and 3 per cent, while STMicro added 0.3 per cent.
Telecom Italia shares climbed 3.9 per cent after Italy's biggest telecoms company appointed Luigi Gubitosi as its new CEO, fuelling talk of a possible sale of its fixed-line network.
Salvatore Ferragamo shares fell 3.3 per cent after Bank of America Merrill Lynch cut the stock to underperform after a four-day luxury goods field trip to China, a key market for the luxury sector.
Swatch shares lost 3.8 per cent after BAML slashed its price target on the stock by 27 per cent, saying watch retailers they met confirmed a significant slowdown in recent months.
Overall Europe's earnings season has failed to impress investors, and analysts have continued to cut their earnings estimates for the Stoxx 600 at the fastest pace since the Brexit vote selloff of June 2016.
"The current economic cycle has been particularly weak and has generated very little revenue growth," wrote Goldman Sachs analysts.
"Net income margins have reached their pre-crisis level and we expect them to peak this year," they added.