European shares fall on Hexagon, Germany figures

INDUSTRY DOWNTURN::Samsung Electronics said its second-quarter profit would plummet, hurting European chipmakers AMS, Siltronic and STMicroelectronics

Reuters

Sun, Jul 07, 2019 - Page 14

European shares on Friday broke a six-day winning streak as poor German data and a downbeat outlook from Sweden’s Hexagon AB weighed, and losses deepened after strong US jobs data saw investors trimming bets of an aggressive rate cut by the US Federal Reserve this month.

The pan-European STOXX 600 on Friday finished down 2.83 points, or 0.7 percent, at 390.11 on broad-based losses, capping the week’s gains at 1.4 percent from 384.87 on June 28.

The index retreated from more than 12-month highs hit a day earlier, fueled by hopes of easier monetary policy from major central banks.

The strong rebound in US job growth last month tempered expectations that the Fed would cut interest rates by 50 basis points this month, which sent the US dollar higher and US stocks lower.

However, bets of a 25 basis point cut were still in play, as data showed that wage gains in the US were tepid.

“These [jobs growth] are good numbers, but a rate cut in July is still all but inevitable,” Aberdeen Standard Investments strategist Luke Bartholomew said.

Hopes of accommodative monetary policy by major central banks and a US-China trade truce were drivers of a fourth week of gains for the European stocks benchmark.

With talks between Washington and Beijing set to resume next week, Citigroup Inc economist Catherine Mann said that the truce had not removed the uncertainty that is still weighing on the global growth outlook.

Swedish industrial technology group Hexagon is among those suffering. It announced 700 job cuts and warned of a drop in quarterly organic sales.

One trader said that the “fairly big cut for a one-month downturn” had sent shock waves through local firms and any with exposure to China.

Hexagon shares tumbled 11 percent to the bottom of the STOXX 600 for their worst day in almost nine years.

That, along with news that German industrial orders had fallen far more than expected in May, weighed on industrial stocks such as Schneider Electric SE, Siemens AG and Sandvik AB.

The industrial goods sector was among the biggest decliners, down 1.9 percent in its worst session since May.

Samsung Electronics Co forecast a plunge in its second-quarter operating profit, citing the US-China trade war, and dragged European chipmakers AMS AG, STMicroelectronics NV and Siltronic AG down more than 2.4 percent.