European shares weighed by Renault sales warning

KNOCK-ON EFFECT:Renault shares dove 12.7 percent, bringing down the wider auto and auto parts index as well as France’s CAC 40 index, which lost 0.7 percent


Sun, Oct 20, 2019 - Page 14

French automaker Renault SA dragged European shares lower on Friday, while the sharpest contraction in the Chinese economy in nearly three decades exacerbated worries about slowing global growth.

Renault slumped 12.7 percent to lowest since 2013 after the company cut its full-year revenue and profit forecast amid a broad-based slump in auto sales.

That led to the wider auto and auto parts index posting its biggest percentage drop in two-and-a-half weeks, while the French CAC 40 fell 0.7 percent, lagging its European peers.

Adding to the gloom in the auto sector, Sweden’s Volvo AB said demand for trucks would fall on both sides of the North Atlantic next year.

The pan-European STOXX 600 was marginally lower, ending its third day of losses at 391.84 points, but still managed to squeeze out a 0.05 weekly gain, dominated by Brexit headlines.

British Prime Minister Boris Johnson on Thursday struck a Brexit deal with the EU, sending the benchmark index to its highest in more than a year, but concerns remain about the deal getting through the British Parliament.

“Everyone is very tired of Brexit. People just want to get this done and look forward to other things, like negotiating a free-trade deal,” Rabobank NV senior market economist Stefan Koopman said.

Uncertainty about the UK’s orderly exit from the EU and other geopolitical tensions, combined with slowing global growth, have rankled financial markets this year.

After a solid increase in the first quarter, gains in the STOXX 600 have tapered off in the second and third.

Fresh data on Friday showed China’s economic growth slowed more than expected in the third quarter.

Investor focus turns to the third-quarter earnings season, which starts in earnest next week.

An earnings recession in Europe is expected to deepen in the third quarter, according to IBES data from Refinitiv.

However, early earnings reports were a mixed bag, with weak results from the defense and retail sectors, but a strong report from Swedish medical technology group Getinge AB.

Its shares jumped 16.3 percent to the top of STOXX 600 after reporting a better-than-expected quarterly core profit.

Thales Group, the largest European defense electronics company, dropped 3.5 percent after lowering its revenue growth forecast for this year, while yogurt maker Danone SA tumbled 6.2 percent after narrowing its sales growth outlook for this year.

London Stock Exchange rose 2.4 percent after reporting a higher-than-expected third-quarter income ahead of the planned shareholder vote on its deal to buy data provider Refinitiv.

Germany’s DAX ticked higher, with help from Deutsche Post AG after Berenberg upgraded the stock to “buy,” while gains in banks propped up Spanish and Italian bourses.