Sun, Oct 28, 2012 - Page 15 News List

Weak corporate earnings dim EU markets

Bloomberg

European stocks retreated this week as companies from Logitech International SA to Royal KPN NV and Oriflame Cosmetics SA reported disappointing results.

Logitech International SA dropped 13 percent after the world’s biggest maker of computer mice forecast lower revenue and operating profit. KPN sank the most in four years as the phone company said third-quarter earnings fell. Oriflame plunged 16 percent after sales missed estimates. PSA Peugeot Citroen lost 13 percent after accepting government debt guarantees in exchange for greater influence over the automaker’s strategy.

The STOXX Europe 600 Index slipped 1.3 percent to 270.51 this week. The equity benchmark has still rallied 16 percent from this year’s low on June 4 as European Central Bank President Mario Draghi pledged to defend the euro and US Federal Reserve Chairman Ben Bernanke announced a third round of quantitative easing.

“The market is coming to terms with the weak global economic background,” said Alan Higgins, chief investment officer at Coutts & Co in London.

In Germany, the IFO institute said its business climate index, based on a survey of 7,000 executives, dropped to 100 this month from 101.4 last month, its sixth straight decline and the lowest reading since February 2010. Economists had predicted an increase to 101.6.

The Spanish economy contracted for a fifth quarter in the three months through last month and unemployment rose to a record 25.02 percent. Moody’s Investors Service lowered the credit rating of Catalonia and four other Spanish regions, citing “the deterioration in their liquidity positions.”

National benchmark indexes declined in all 18 Western European markets, except Greece and Ireland. Germany’s DAX and France’s CAC 40 fell 2 percent, while the UK’s FTSE 100 slipped 1.5 percent.

Of STOXX 600 companies that have released earnings since Oct. 9, 52 percent have exceeded per-share profit estimates, according to data compiled by Bloomberg.

Logitech dropped 13 percent this week, the most in a month. The company said it expects the PC market “weakness” to more than offset the positive effect of its new products and predicted sales and operating income for the second half of the next fiscal year to be lower than a year earlier.

A gauge of telecommunications stocks was the worst performer among the 19 industry groups on the STOXX 600, falling 3 percent.

KPN, the Dutch phone company partly owned by Carlos Slim’s America Movil SAB lost 11 percent as third-quarter profit slid 32 percent amid increasing German price competition and declining mobile subscription revenue. That was the stock’s biggest weekly drop since October 2008.

France Telecom SA tumbled 8.5 percent, the most in 13 months. The largest French phone company cut its dividend forecast for this year and said it expects to generate less cash next year as it battles cheaper competitors.

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