European indexes pared gains to close slightly lower yesterday after more weak corporate and economic data in the United States and Europe heightened fears over the growth outlook.
The FTSEurofirst 300 closed down 0.03 per cent at 1,147.38 points, having fallen from a session high of 1,154.62, to post its fifth straight day of falls and take its second-quarter decline to 3.5 per cent.
Banks were the worst-hit sector, down 1.1 per cent, with French bank Societe Generale among the top fallers, down 3.5 per cent.
Traders cited weak results from US peer Morgan Stanley as contributing to the decline.
That followed forecast-lagging earnings from European firms including Sodexo and Nokia, down 9.6 per cent and 8.3 per cent, respectively.
Overall, STOXX Europe 600 companies are set to under-shoot first-quarter earnings expectations by 3.9 per cent, according to Thomson Reuters StarMine.
“We’re going into this earnings season with very low expec-tations. That’s not a problem in and of itself, it’s how much better or worse we do than that,” Daniel Morris, market strategist at JPMorgan Asset Manage-ment, said.
Sentiment was further bruised after several US economic data releases came in weaker than expected – fresh concern for those investors looking for US growth to help support earnings and offset weakness in Europe.
The earnings news was not all bad, however, with the world’s largest maker of crop chemicals, Syngenta AG, up three per cent on solid first-quarter sales to help the chemicals sector outperform, up 0.6 per cent.
Adding most points to the index was GlaxoSmithKline, which gained 3.2 per cent in heavy volume after the potentially earnings-enhancing news that a US panel had recommended approval of its new lung drug, Breo Ellipta.
That helped it add most points to the FTSEurofirst 300 in volume nearly two-and-a-half times its 90-day daily average.
Fellow defensive heavyweight Vodafone also lent its support, up three per cent after comments from US joint venture partner Verizon buoyed those hoping Vodafone may exit its stake.
Despite a smattering of deals in recent months, mergers and acquisitions activity in Europe remains subdued as the growth outlook continues to dent confidence and prevent corporates parting with their cash piles.
“If we have a small recovery in Europe, a stabilisation of the banking system and better numbers in terms of economic growth, the M&A picture might change,” Sophie Elkrief, Deputy Head of Alternative Investments at Dexia Asset Management, said. (Reuters)