European shares steady above seven-week low as tech and telecoms earnings impress
Reuters
Published Nov 14, 2017 04:51AM ET
European shares steady above seven-week low as tech and telecoms earnings impress
By Helen Reid
LONDON (Reuters) - Encouraging earnings from telecoms and tech companies supported European shares on Tuesday, helping them steady above a seven-week low hit in the previous session.
The pan-European STOXX 600 (STOXX) erased earlier gains to trade flat, while telecom and tech sector strength helped German and French benchmarks gain 0.4 percent, and euro zone blue-chips (STOXX50E) rose 0.1 percent.
"Markets have moved quite a long way and a pause is probably warranted, but we don't think it's a big turning point," said Ronan Carr, European equity strategist at Bank of America (NYSE:BAC) Merrill-Lynch (BAML).
"Underlying fundamentals are still pretty constructive in terms of global growth, and we would be a buyer of any material dip in markets," he added.
Tech companies were the best-performing after stronger than expected results. Software maker Simcorp (CO:SIM) jumped 9.2 percent after earnings beat forecasts.
Internet services provider United Internet (DE:UTDI) gained 1.8 percent after its acquisition of mobile firm Drillisch boosted its profits.
Peer Scout24 (DE:G24n) also jumped 4.8 percent.
Chipmaker Infineon (DE:IFXGn) gained 4.9 percent despite reporting weaker dollar-dented sales.
"While slightly disappointing, we continue to expect Infineon's margins to resume their upward trajectory," wrote Liberum analysts, saying the main headwind to sales and profitability was the stronger euro.
"Underlying growth trends in the tech sector are quite strong," said BAML's Carr. "Tech sector revisions momentum has not definitively bottomed out but it looks like it's finding a floor, much like the broader market."
Telecoms also delivered strong results.
German firm Drillisch (DE:DRIG) rose 2.8 percent after it reported a 9.9 percent rise in nine-month revenues, and Britain's Vodafone (L:VOD) gained 4 percent after upping forecasts for full-year earnings growth.
Altice (AS:ATCA) bucked the sector trend, sinking 6 percent after Morgan Stanley (NYSE:MS) cut its price target on the stock by 34 percent, adding to pressure on the shares which are already down 46 percent this year.
Stocks have had violent reactions to results this quarter, Goldman Sachs (NYSE:GS) strategists said. Earnings-day price moves have been more than 3.5 times the average daily move – the most extreme results reactions the bank had data for.
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BAML's Carr said: "The penalty for misses is smaller this quarter, and the boost from beating is at the higher end of the range, but it's fairly benign. I would not agree that it's been extreme."
As the earnings season neared its end, MSCI euro zone companies were tracking 9.9 percent year-on-year earnings growth in U.S. dollar terms, and 62 percent of companies in the euro zone index had beaten or met earnings estimates.
Analysts had revised down earnings estimates for the broader MSCI Europe but downgrades seemed to have stabilized as the results season developed.
Written By: Reuters
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