European stocks down despite positive earnings
European equities fell yesterday despite a raft of largely positive company results, with trading volumes boosted by the resumption of activity in storm-struck New York.
London’s FTSE 100 index of top companies dropped 1.15 per cent to 5,782.7 points, while in Frankfurt the DAX 30 slid 0.33 per cent to 7,260.63 points, and in Paris the CAC 40 gave up 0.87 per cent to 3,429.27 points.
US stock markets dropped after returning from a historic two-day closure forced by superstorm Sandy, which completely shut down the US financial capital of New York.
Even though much of the city was still suffering the effects of power outages, flooding and wind damage, trading was smooth on the New York Stock Exchange and the tech-rich Nasdaq exchange, which were running on backup generators.
“After a positive morning session European markets have started to slide back in the afternoon session as the early morning optimism evaporated with the return of US markets to the fray after a two day weather induced absence,” said Michael Hewson, Senior Market Analyst at CMC Markets UK.
“Whatever the reasons for this afternoon’s sell off, whether it renewed concerns about Greece’s debt sustainability ... or a reaction to the return of US markets, the fact remains that despite some fairly good company earnings reports, the outlook on an economic growth basis in Europe remains on a downward track,” he added.
European officials denied yesterday that a deal had been reached that would see Greece receive bailout funds needed to stave off bankruptcy next month, while Athens released even worse growth and debt forecasts as part of its 2013 budget.
Unemployment in the 17-nation eurozone hit also hit a new all-time high of 11.6 per cent in September.
Nevertheless Spain’s and Italy’s 10-year bond yields, a sign of stress in the eurozone, continued their downward slide.
The rate of return for investors on Spanish 10-year bonds dropped to 5.616 per cent from 5.670 per cent on Tuesday. The yield on 10-year Italian bonds slid to 4.960 per cent from 4.994 per cent.
Strong corporate earnings had provided the markets with an early boost.
The French oil group Total said that adjusted third-quarter net profit – excluding changes in inventory values – spiked 20 percent to €3.348 billion, boosted by high oil prices and improved refining margins in Europe.
Total shares nonetheless closed down 0.44 per cent to €38.82, after spending most of the day up.
Shares in the world’s top steelmaker ArcelorMittal fell 6.43 per cent to €11.43 after the group reported a plunge into third-quarter loss and cut its dividend owing to weak demand in China and Europe.
GDF Suez posted a 5.8-per cent hike in its earnings before interest, taxes, depreciation and amortization for the first nine months of the year. After gaining nearly two percent during the session, the company’s shares ended down 0.03 per cent at €17.71.
Europe’s airline sector also lit up traders’ radar screens, with Air France-KLM and Lufthansa posting better-than-expected results.