Bloomberg News

European Stocks Fall on Company Earnings; HSBC Retreats

November 05, 2012

European (SXXP) stocks dropped by the most in two weeks after HSBC Holdings Plc (HSBA) and CGGVeritas reported earnings that disappointed investors and amid concern that Greece will struggle to get further aid.

HSBC lost 1.3 percent as Europe’s largest bank by value also said it will likely face criminal charges from U.S. anti- money laundering probes. CGGVeritas retreated 3.1 percent after third-quarter profit missed analyst estimates. PostNL sank 11 percent after saying full-year earnings will be at the bottom half of forecasts and on concern the proposed sale of TNT Express NV (TNTE) may be held up by regulators.

The Stoxx Europe 600 Index (SXXP) fell 0.6 percent to 273.21 at the close of trading, its lowest level since Oct. 23. The gauge has still climbed 17 percent from its low on June 4, boosted by stimulus program announcements from the European Central Bank and U.S. Federal Reserve as well as better-than-forecast economic data.

“There is no way really that you can paint a positive picture on third-quarter earnings,” Bob Parker, senior adviser at Credit Suisse Asset Management in London, said on Bloomberg Television. “That has been one of the reasons why we’ve had a stop-start market. Expectations for profitability for the third quarter both in the U.S. and Europe were extremely negative.”

Profit has topped analysts’ forecasts at 53 percent of the companies on the Stoxx 600 that have reported results since Oct. 9, according to data compiled by Bloomberg. Revenue has beaten estimates at 50 percent of companies, down from 60 percent in the previous quarter, the data shows.

Low Volume

The volume of shares changing hands in companies on the Stoxx 600 was 29 percent lower today than the average of the last 30 days, according to data compiled by Bloomberg, as investors await Greek lawmakers to vote on budget cuts that are required to secure more aid.

Prime Minister Antonis Samaras pledged yesterday that the raft of wage and pension cuts in the latest austerity package will be the last and that Greek society won’t tolerate any more, according to comments made to lawmakers of his New Democracy party. The first parliamentary vote is scheduled to take place as early as Nov. 7.

Investors also await the outcome of tomorrow’s U.S. election between President Barack Obama and Republican challenger Mitt Romney. Obama led Romney 48 percent to 45 percent in an Oct. 31- Nov. 3 national poll conducted by the Pew Research Center, a survey that was deadlocked at 47 percent each a week ago.

China Leadership

China’s President Hu Jintao is set to hand over leadership of the Communist Party to Vice President Xi Jinping at a party congress that begins Nov. 8.

“Normally, each event in their own right would be considered as a defining issue for the week,” said Zahid Mahmood, a senior trader at Capital Spreads in London. “The fact that you have so many in the same week makes forecasting where the markets may be by Friday next to impossible.”

National benchmark indexes declined in 15 of the 18 western European markets. The U.K.’s FTSE 100 dropped 0.5 percent, France’s CAC 40 lost 1.3 percent and Germany’s DAX retreated 0.5 percent.

HSBC fell 1.3 percent to 618 pence in London, the biggest drop since Sept. 26, after reporting third-quarter underlying pretax profit of $5.04 billion, missing the $5.6 billion median estimate of eight analysts surveyed by Bloomberg.

The lender also said it’s likely to face criminal charges over allegations it broke U.S. anti-money laundering rules and that it set aside a further $800 million to cover the costs of the probe. The bank made a $700 million provision in July after a Senate committee found it had given terrorists and drug cartels access to the U.S. financial system.

CGGVeritas Drops

CGGVeritas (GA), the world’s largest surveyor of oilfields, lost 3.1 percent to 24.51 euros after the company reported third- quarter net profit of $48 million, missing analyst estimates for $68 million. The shares fell even as the company confirmed its 2012 targets.

PostNL (PNL) sank 11 percent to 2.77 euros, its lowest price in almost seven months, after the Dutch mail service company said full-year underlying cash operating income would be in the bottom half of a forecast of between 110 million euros ($140 million) and 160 million euros. The shares fell even as the company narrowed its third-quarter loss to 154 million euros.

TNT Express NV (TNTE), which is 30 percent owned by PostNL, declined 1.9 percent to 7.94 euros after European Union Competition Commissioner Joaquin Almunia said late Friday that United Parcel Service Inc.’s bid for TNT Express needed “substantial remedies” to settle antitrust concerns.

UPS Committed

UPS, the world’s largest package-delivery company, received antitrust objections from regulators last month listing possible issues with its 5.16 billion-euro bid. UPS remains committed to the transaction and will seek to address the EU’s concerns in the coming weeks, UPS spokeswoman Peggy Gardner said in an e- mail in response to the Almunia speech.

Inmarsat Plc (ISAT) fell 3.2 percent to 560 pence after the satellite company reported third-quarter earnings that missed estimates. Earnings before interest, taxes, depreciation and amortization fell to $161 million from $172 million. Analysts had estimated earnings of $164 million in a Bloomberg survey.

Ryanair Holdings Plc (RYA) surged 5.8 percent to 4.81 euros in Dublin after Europe’s biggest discount airline reported a 23 percent jump in second-quarter net profit to 496.8 million euros.

The carrier also said annual earnings will be in the range of 490 million euros to 520 million euros. It had previously forecast annual profit would shrink to between 400 million euros and 440 million euros.

Weir Group Plc (WEIR) advanced 4.5 percent to 1,831 pence. The world’s largest provider of pumps to mining companies predicted profit will grow at a double-digit pace this year and that net debt will fall by the end of December.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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