Tags: Europe | stocks | earnings | gold

European Stocks Decline as Earnings Miss Forecasts; Gold Gains

Monday, 20 October 2014 01:42 PM

European stocks fell after worse-than-estimated financial results, while German bonds and gold climbed for the first time in three days. U.S. shares were little changed and Treasurys gained.

The Stoxx Europe 600 Index dropped 0.7 percent at 10:19 a.m. in New York after SAP SE cut its profit forecast and Royal Philips NV earnings missed analysts’ estimates. Germany’s 10- year bond yield fell three basis points to 0.83 percent and gold added 0.6 percent.

About $4.3 trillion was erased from the value of global equities in the past four weeks on concern economic growth is slowing. The European Central Bank started purchases of covered bonds today in an effort to stimulate the region’s economy, according to three people familiar with the matter. Apple Inc. is among U.S. companies reporting earnings Monday.

“I do not expect a big positive impulse from the current earnings season in Europe,” said Benedict Goette, founder of asset-management company Compass Capital AG in Zurich. “Unless a multi-day up-move develops, people will remain nervous. We’re now in the highly volatile phase of attempting to bottom, but I would expect a final bottom only by the end of October or mid- November.”

Earnings Forecasts

Apple climbed 1.4 percent as analysts estimate the iPhone maker’s profit jumped 10 percent last quarter. International Business Machines Corp. shares fell 7.3 percent in New York after the company ditched its five-year profit goal as it struggles to transform quickly enough to cope with an industrywide shift to the cloud-computing era. Halliburton Co., the largest provider of oil and gas fracking services, rose 0.5 percent after it boosting its dividend.

The S&P 500 was steady after a four-week decline, its longest stretch since August 2011. It’s retreated 6.2 percent from a record high in September.

Eighteen of the 19 industry groups in the Stoxx 600 fell, with trading volume 18 percent greater than the 30-day average, according to data compiled by Bloomberg. The gauge fell after dropping for four weeks, the longest streak since June 2013.

SAP retreated 5.7 percent after cutting its full-year earnings while Philips slid 4.5 percent after third-quarter sales and profit missed analysts’ estimates. Nutreco NV jumped 39 percent after SHV Holdings NV agreed to buy the fish-feed maker.

Tesco, Adidas

Tesco Plc added 2.8 percent after the London-based Times said that private equity firms may be interested in acquiring its Asian business. Adidas AG rose 4.7 percent after the Wall Street Journal said a group of investors is planning to bid about 1.7 billion euros ($2.2 billion) for its Reebok unit.

The MSCI All-Country World Index rose 0.2 percent for a second day of gains. The MSCI Asia Pacific Index gained 2.2 percent, rebounding after a six-week loss. The MSCI Emerging Markets Index climbed 0.7 percent, headed for the biggest gain in two weeks. Foreign investors bought 28 billion won more shares than they sold of South Korea’s Kospi Index today, the first net inflows since Sept. 30.

The People’s Bank of China is providing funds to joint- stock banks to help them prepare for year-end liquidity needs, a government official familiar with the matter said on Oct. 17, asking not to be identified because there hasn’t been an official announcement. The liquidity injection came before today’s start of a Communist Party meeting and tomorrow’s gross domestic product data.

European Bonds

German bonds rose for the first time in three days as investors sought Europe’s safest fixed-income assets. Yields on 10-year gilts fell six basis points to 2.13 percent. The Bank of England suspended a critical part of is Real Time Gross Settlement system, which handles 575 billion pounds of daily payments between the country’s banks, citing a technical failure.

Government bonds from Italy and Spain fell, extending a selloff from last week. Italy’s 10-year rate climbed seven basis points to 2.56 percent after increasing 17 basis points last week. Spain’s rose six basis points to 2.22 percent.

The ECB bought short-dated notes, from Societe Generale SA and BNP Paribas SA, said two people familiar with the matter, who asked not to be identified because the information is private. An ECB spokesman confirmed that purchases started today. Officials at SocGen and BNP weren’t immediately available to comment on the transactions.

“From today we will begin to know how aggressive the ECB will be in bidding for bonds,” said Agustin Martin, head of European credit research at Banco Bilbao Vizcaya Argentaria SA in London.

Ukraine Gas

Gold climbed for the first time in three days to $1,244.86 an ounce. U.K. natural gas dropped for a second day. Ukraine will have natural gas for the winter after agreeing to pay $385 per thousand cubic meters of fuel from Russia until March 31, Ukraine President Petro Poroshenko said. Russia pipes about 15 percent of the European Union’s natural gas needs through Ukraine.

The ruble weakened 0.9 percent against the dollar, after capping its sixth weekly decline on Oct. 17. Russia has spent more than $13 billion on interventions this month amid a bear market in oil, the nation’s main export earner, and as sanctions over Ukraine worsened a dollar shortage.

Sanctions Talks

Russia’s foreign minister said his country will refuse to accept conditions to end sanctions after talks in Italy failed to produce a breakthrough to bolster a truce in the eastern Ukrainian conflict. Russia has been told to comply with various criteria before the U.S. and its allies revoke the limitations, Sergei Lavrov said in the transcript of an NTV interview posted on the ministry’s website yesterday.

Russia’s credit rating was cut one step to Baa2, the second-lowest investment grade, a with a negative outlook by Moody’s Investors Service, which cited sluggish growth prospects and the erosion of reserves.

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European stocks fell after worse-than-estimated financial results, while German bonds and gold climbed for the first time in three days. U.S. shares were little changed and Treasuries gained.
Europe, stocks, earnings, gold
Monday, 20 October 2014 01:42 PM
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