European shares inched lower on Friday, weighed down by disappointing trading updates from fashion brands Hennes & Mauritz AB (H&M) and Salvatore Ferragamo SpA, and weakness among heavyweight banks.
However, dealmaking in the telecom sector and gains among utility stocks offset part of the losses, helping the pan-European STOXX 600 come off opening lows.
The STOXX fell 0.2 percent by 9:38am, while eurozone blue chips were down 0.1 percent after briefly turning positive and the UK’s FTSE 100 was flat.
The STOXX 600 ended the week down 0.3 percent, as resurfacing worries over possible political risk spurred profit taking and offset continued optimism in the region’s economic recovery.
The pan-European index is 2.3 percent below the two-year peak hit at the start of last month, but is up more than 6 percent so far this year.
H&M plunged 15 percent, leading losers on the STOXX, after the world’s second-largest fashion retailer reported an unexpected drop in quarterly sales as fewer shoppers visited its stores.
“Fourth-quarter sales were a long way below expectations. Brand recovery could now take longer than expected,” UBS Group AG said in a note, highlighting also possible risks to its dividend.
The stock hit its lowest since April 2009 and was on track for its biggest one day loss in 16 years.
Ferragamo fell 7.5 percent after the Italian luxury goods company said it could not confirm targets it had set for the next three years and next year would be another year of transition.
Berenberg said the disappointment over Ferragamo could shift the attention of investors looking for turnaround stories to companies like Burberry Group PLC, down 0.4 percent, Hong-Kong listed Prada SpA and Tod’s SpA, down 1.3 percent.
Banks continued to be under pressure a day after central banks in the eurozone and the UK kept benchmark interest rates unchanged.
Shares in HSBC Holdings PLC, BNP Paribas Group and Intesa Sanpaolo SpA fell between 0.7 and 1 percent.
Telecoms, the worst-performing sector in Europe this year, outperformed the broader weakness, up 0.1 percent.
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