Germany’s benchmark index led European shares lower yesterday as a spate of underwhelming company results helped it to underperform its southern European peers.
The DAX fell 0.7 per cent to 8,244.91 and the FTSEurofirst 300 closed down 0.3 per cent at 1,205.19, with investors unsettled this week by profit warnings from some of Germany’s leading companies.
Despite the retreat, the DAX’s two-year uptrend remains intact although the near-term support around 8,075 could be tested heading into the German elections in late September.
“A grand coalition including the SPD will open the door for more debt mutualisation, which will support peripheral countries,” Roland Kaloyan, Asset Allocation Strategist at Societe Generale corporate and investment banking, said.
“We favour peripherals with preference for Spain over Italy and France over Germany.”
Yesterday, France’s CAC rose 0.3 per cent to 3,968.84 with LVMH rising 3.6 per cent after the luxury group joined rival Kering in pointing to an uptick in sales in the second quarter.
Spain’s IBEX, up 0.9 per cent, outperformed Italy’s FTSE MIB, which was down 0.1 per cent.
The FTSE 100 sagged too, testing support around the 6,544 level, which is the 61.8 per cent Fibonacci retracement of the fall from May highs to June lows.
Britain’s benchmark index was dragged down by heavyweight financials, which took off seven points. UK lenders Lloyds Banking Group and Royal Bank of Scotland fell 0.4 and three per cent respectively as Investec issued cautious notes on both banks ahead of earnings next week.
Lenders were also hit after UBS swallowed a $885 million settlement with a US regulator over allegations the Swiss bank misrepresented mortgage-backed bonds during the housing bubble, paving the way for billions more to be paid by other banks.
Although results from Pay-TV operator BSkyB were initially well received by analysts, the company’s shares fell 3.3 per cent with traders citing profit taking after the 11 per cent rise ahead of the numbers.
Engine maker Rolls Royce was the top faller, down 3.2 per cent after Deutsche Bank cut its rating to “sell” the day after results.
Deutsche Boerse fell 3.7 per cent after its second-quarter earnings missed forecasts.
Steelmaker ThyssenKrupp shed 2.9 per cent after a media report that late-stage talks over the sale of an unprofitable unit had hit a snag, while carmaker Daimler dipped 2.3 per cent.
Starmine data showed 67 per cent of German-listed companies have so far missed earnings expectations in the second-quarter with the remaining firms expected to miss forecasts by an average of 0.5 per cent.
Shares in publishing group Pearson, however, rose 6.1 per cent to close just off 12-year highs after it announced the sale of its Mergermarket news service along with first-half results.