European shares dip as HSBC disappoints, trade fears linger on

[LONDON] European shares dipped on Monday in choppy trading as HSBC, Europe's biggest bank, disappointed investors, while doubts over a planned US$87 billion tie-up with Praxair sank shares in German industrial gases group Linde.

Concern over a trade dispute between the United States and China and a mixed bag of corporate results also weighed on Wall Street, which opened flat.

The pan-European Stoxx 600 closed down 0.2 per cent with the banking sector falling 0.7 per cent.

HSBC shares fell one per cent after it reported disappointing earnings due to rising expenses from investments in a new growth strategy and a US$765 million provision against sale of US mortgage securities.

"On revenues, we note on the positive side that loan growth continues to be very strong," Goldman Sachs analysts said in a note. "On the negative side, we note that the group has lowered its expected net interest income sensitivity to USD rates."

Banco BPM shares fell 6 per cent after the Italian lender's earnings missed forecasts due to higher than expected loan loss provisions, and its capital buffer suffered due to sharp falls in Italian government bonds during May's political upheaval.

Overall Europe's banks have performed well in the second-quarter earnings season, with stronger than expected earnings growth and profitability.

M&A disappointments hit some shares hard.

Linde sank 7.5 per cent after it said regulators may ask it and its US rival Praxair to sell more assets in order to get antitrust approval for their merger.

"The probability for the merger has decreased," Baader Helvea analysts said in a note, adding however they still believe it will close successfully.

The heavyweight stock pulled the chemicals sector index down one per cent.

Germany suffered the biggest drop in industrial orders in 1-1/2 years, driving industrial giants Siemens and Thyssenkrupp down 0.4 per cent and 0.9 per cent.

British serviced offices group IWG also suffered from M&A pain, sinking 20.5 per cent to the bottom of the Stoxx 600 after the firm ended takeover talks with private equity firms Terra Firma, TDR and Starwood.

A target price hike from Morgan Stanley boosted Galapagos shares up 4.7 per cent, the best performance of the Stoxx 600.

Overall second-quarter earnings for MSCI Europe firms are expected to grow 7.8 per cent year-on-year in euro terms, while they are expected to grow 2.5 per cent year-on-year for MSCI EMU.

Europe remains an unpopular region for stocks investors, though some indicated the outflows could turn soon as companies deliver good results and analysts revise their earnings expectations up.

REUTERS