European stocks fell this week after earnings reports from Nokia Oyj and SAP AG dented optimism that increased consumer and business spending will drive profit growth throughout the region.
The Dow Jones Stoxx 50 Index shed 0.2 percent to 2403.98 in London Friday, extending this week's loss to 1.1 percent. The Stoxx 600 was unchanged at 205.16, making a loss of 0.7 percent for the week.
Both indexes have risen 26 percent from six-year lows in March amid optimism demand for technology-related products is picking up. Clariden Bank, a private Swiss bank with US$22 billion under management, said it will cut equity holdings because gains aren't justified by the outlook for earnings and the economy.
"To meet expectations is not enough considering the rise in stock prices we've had," said Leif Millarg, who manages about US$728 million at Activest Investment GmbH in Munich and recently sold shares of Nokia and Royal Philips Electronics NV. "We need further positive signals."
Benchmark indexes gained in 13 of the 17 Western European markets today. Germany's DAX Index added 1.1 percent and the UK's FTSE 100 Index rose 0.4 percent. France's CAC 40 Index shed 0.01 percent.
The Stoxx 600 technology index, this year's best performer, has dropped 4.5 percent since last Friday. Nokia, the world's biggest mobile-phone company, led declines with a 17 percent loss.
Sales may drop
The Finnish company said Thursday third-quarter revenue from mobile phones may fall because of the weakness of the dollar and lower handset prices in emerging markets such as India. Nokia also forecast a drop of as much as 20 percent in network sales.
The US currency has fallen 7.6 percent against the euro this year, reducing the value of dollar-linked sales at Nokia and other European exporters.
SAP, the world's largest business-management software company, has lost 2.5 percent in the past five sessions. SAP yesterday said it attracted fewer new customers than analysts expected in the second quarter. Software license revenue, a measure of new business, slid 13 percent to 431 million euros (US$486 million). Analysts expected 460 million euros.
Technology shares have been surging on optimism demand for computers and other products would rebound from a three-year slump amid a US-led revival in global economic growth. The Stoxx 600 technology index has climbed 12 percent this year, leading gains among the 18 industry groups.
"To stay on these levels or rise further, stocks must be supported by a consistent improvement in the economy," said Emanuele Vigano, who helps manage the equivalent of US$784.4 million at Bipielle Fondicri Sgr SpA in Milan.
The Nokia and SAP reports helped overshadow Ericsson AB's results yesterday. The company said its second-quarter pretax loss, excluding reorganization costs and one-time items, narrowed to 200 million kronor (US$24.3 million) from 3.08 billion kronor a year earlier. Analysts in an SME Direkt survey predicted a 1.9 billion-krona loss.
Sales were 27.6 billion kronor, more than the 27.4 billion kronor forecast by analysts surveyed by SME Direkt.
"This is a good result and we expect sentiment toward the shares to strengthen further over the next few weeks," said Richard Windsor, an analyst at Nomura International. However, the company's business remains "challenging."
Ericsson, the world's largest maker of wireless networks, surged 1.35 euros, or 15 percent, to 10.1 yesterday. The shares are still 80 percent below their record set in March 2000.
Infineon Technologies AG has led European semiconductor stocks higher this week. Industry leader Intel Corp on Tuesday said second-quarter profit doubled and sales this period may rise more than analysts' forecasts.
Infineon, whose main product is computer-memory chips, has jumped 11 percent to 11.11 euros since last Friday. ASML Holding NV, the world's biggest maker of machines used to etch circuits onto chips, gained 3.2 percent. ARM Holdings Plc, whose chip designs are used in about 70 percent of the world's mobile phones, added 4.2 percent.
STMicroelectronics NV, which makes chips for mobile phones, added 0.8 percent. The company pared gains for the week after the forecast from Nokia, ST's biggest customer.
The response of analysts to results released in July has been to ratchet back forecasts, according to JCF International in London. Analysts predict this year's profit at Stoxx 600 companies will rise 24.9 percent on average, according a July 17 survey by JCF.
That's less than the 25.5 percent forecast at the end of last month.
Clariden is reducing the proportion of shares it holds to 15 percent from 20 percent this month, said executive vice-president Fabrice Vallat. Clariden is a unit of Credit Suisse Group, Switzerland's No. 2 bank.
Alstom SA, the French company whose power stations generate a fifth of the world's electricity, shed 2.5 percent today to 2.71 euros, for a loss this week of 6.2 percent. Orders declined 29 percent to 4.04 billion euros in the three months ended June 30 as utilities held off spending on equipment. Sales dropped 18 percent to 4.34 billion euros.
The Stoxx 600 insurance index was the biggest gaining industry group this week, adding 3.3 percent. Mark Cathcart, an analyst at Deutsche Bank, on Wednesday advised investors to sell shares of banks and buy insurers.
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