Europe: Warnings, downgrades weigh as shares post another weekly fall

[MILAN] Disappointing earnings updates and a series of broker downgrades weighed on European shares on Friday, with regional indexes posting their second weekly fall in a row.

Investors have been locking in profits, shrugging off continued strength in economic data as euro zone earnings growth slowed compared to the previous quarters and caution rose over whether a stock market rally could continue.

On Friday, Elior slumped more than 18 per cent after Europe's third-largest catering group cut its profit guidance, citing the impact of Hurricane Irma.

Shares in Fresenius SE, Greene King, Just Eat, United Utilities and H&M all fell more than 2 per cent after ratings downgrades from brokers.

The Stoxx 600 was down 0.3 per cent at its close, taking losses so far this week to 1.3 per cent, its second negative week in a row. The pan-European benchmark index is still up more than 6 per cent so far this year.

"The big question remains as to whether this is merely a pause in the context of a wider correction or whether we'll see a resumption of the uptrend that has been in place since the beginning of 2016," said CMC Markets analyst Michael Hewson.

A speech from ECB President Mario Draghi in Frankfurt had little impact on stocks, even though traders said his tone was relatively upbeat on the economy.

Among gainers, Vivendi rose 4.4 per cent, reversing earlier weakness as investors digested an earnings update from the acquisitive French media conglomerate.

Vivendi missed analysts' third-quarter estimates but kept its 2017 growth targets for revenue and EBITA. It also ruled out a hostile takeover of Ubisoft for the next six months.

UBS affirmed its buy rating, saying the confirmed guidance suggested that a sales slowdown at Vivendi's Universal Music Group unit could reverse in the fourth quarter, while it expected Vivendi's Canal+ business to help grow earnings in the short term.

Outside the Stoxx, Carillion fell more than 48 per cent after the UK builder said it would breach its financial covenant and warned on profits for the third time this year.

"Some investors might think this is the end but Carillion is too big to fail. Government intervention is possible but this is a nightmare for ministers at such a sensitive moment for the economy," said ETX Capital analyst Neil Wilson.

Sky rose more than 4 per cent.

Reuters reported that Comcast and Verizon had both expressed interest in acquiring a significant part of the assets of Rupert Murdoch's Twenty-First Century Fox's, including the European pay TV provider.

REUTERS