Eurostocks mixed as UBS surges, autos, HVB sink

European shares were mixed late yesterday as major dollar-earners such as DaimlerChrysler again fell hostage to a strong euro, helping offset a results-inspired surge in Swiss bank UBS.

Modest losses on Wall Street also trimmed morning gains but fund managers said they expected European and US stock markets to decouple further in coming weeks as investors woke up to the full implications for corporate Europe of a rampant euro.

"That's going to hit home sometime soon," said Stuart Fraser, a European equities fund manager at Standard LIfe Investments in Edinburgh.

Strategists have said the euro's relentless push higher to four-year lows threatens to derail European companies' long-awaited pickup in profits, by undermining competitiveness and devaluing foreign currency earnings.

By 1550 GMT, with only Frankfurt still trading officially, the FTSE Eurotop 300 index of Eurpopean blue-chips was up 0.5 per cent at 817 points while the euro zone DJ Euro Stoxx 50 index shed 0.2 per cent to 2,313 points.

Trading volumes were a little below average. After rebounding more than 20 per cent from mid-March's six-year low, the Eurotop benchmark index has been treading water within a narrow 20-point range since mid-April, while US markets continued to rise.

The Eurotop 300 is down about five per cent so far this year, while the S&P 500 of US shares is up about seven per cent.

Shares fell in Frankfurt, Paris, Madrid, Milan, and Amsterdam but rose elsewhere.

The Swiss market index led the national benchmark leaderboard with a rise of 1.3 per cent, as investors applauded a solid results statement from Europe's biggest bank by market cap, UBS.

Shares in UBS rose 4.2 per cent, after it said it saw signs the bear market in stocks was ending and posted a smaller-than-expected drop in first-quarter profit.

Shares in fellow Swiss bank Credit Suisse took a lift from UBS's announcement, adding 4.4 per cent.

Auto shares fell again as fears linked to the strengthening of the euro led investment bank Goldman Sachs to downgrade the European sector to "neutral" from "attractive". (Reuters)

"Any chance of outperformance by the autos is likely to be undermined by the rapid strength of the euro," said Goldman Sachs autos analyst Keith Hayes, who warned that the higher euro would hit profits from crucial export markets.

German giants DaimlerChrysler and Volkswagen, and French rival Peugeot lost between 1.8 per cent and 2.5 per cent each.

Chemical companies are also major exporters, and the sector was the second weakest after autos, led lower by Germany's two powerhouses, Bayer and BASF.

Dutch Akzo Nobel shed 3.0 per cent. In contrast to UBS, HVB Group, Germany's second-largest bank, sank 7.5 per cent as doubts grew over whether it could sustain the recovery shown in the first quarter, when the group posted a narrower net loss.

But shares in Banca Intesa rose 3.1 per cent after Italy's largest bank by assets reported a stronger-than-expected first-quarter net profit.

Meanwhile, the media sector was lifted by perky advertising stocks, with France's Havas up 12.6 per cent as investors looked past first-quarter revenues that were at the bottom of analysts' forecasts to news that the firm had paid down part of a big convertible bond issue.

German trucks and engineering group MAN sank 6.2 per cent after it reported a worse-than-expected first-quarter loss and said more job cuts would be needed to lift profits this year.