EUROPEAN shares snapped a nine-day winning streak on Thursday (May 16), weighed by Germany’s Siemens after a second-quarter industrial profit miss, while a number of automobile and energy stocks also dropped on trading ex-dividend.
The pan-European Stoxx 600 was down 0.2 per cent after hitting a record high on Wednesday, as a lower-than-expected rise in US consumer prices in April boosted bets for a September rate cut by the Federal Reserve, in a boost to global sentiment.
Siemens declined 6.6 per cent, to mark its worst day in over two years, as the group’s second-quarter industrial profit fell 2 per cent and missed estimates after a slowdown at its flagship factory automation division.
The stock weighed on Germany’s DAX, while the broader industrial goods and services sector lost over 1 per cent.
The automobile sector was the worst hit, down 1.2 per cent, as Bayerische Motoren Werke and Daimler Truck dropped 6.3 per cent and 5.1 per cent, respectively, upon trading ex-dividend.
The energy sector also fell 1 per cent, with oil major BP shedding 1.5 per cent on trading ex-dividend and Eni losing 2.2 per cent after Italy’s Treasury sold a 2.8 per cent stake in the energy group for 1.4 billion euros.
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The hopes of lower borrowing costs later in the year have kept the Stoxx 600 trading near record highs. Policymakers have hinted at a June rate cut, however, the outlook beyond that remains uncertain.
European Central Bank (ECB) policymaker Martins Kazaks said the ECB is not in a hurry to ease policy, so subsequent moves could be spaced out to give time for assessment.
Nicolo Bragazza, associate portfolio manager at Morningstar Wealth said that as the ECB reduces interest rates, high-dividend paying utility stocks are expected to benefit.
The utility sector has gained 2 per cent year-to-date, underperforming the benchmark Stoxx which has added 9 per cent.
Bragazza added that consumer discretionary-related companies along with real estate stocks could see the immediate benefit of lower interest rates, while financials could take a hit as net interest margins narrow.
On the day, the insurance sector topped sectoral gainers, up 1.6 per cent, with Zurich Insurance climbing 3.5 per cent after higher first-quarter property and casualty premiums and Swiss Re jumping 3.8 per cent after first-quarter results beat expectations and news of plans to exit its digital white-label business.
Roche jumped 3.2 per cent after an early-stage trial showed the obesity drug candidate by newly acquired Carmot Therapeutics led to significant weight loss.
Ubisoft slid 13.5 per cent to the bottom of the Stoxx, weighed by “lacklustre” guidance and “uneven” FY2024 results, while Sweco soared 15 per cent after first-quarter core earnings beat expectations.
Elsewhere, Sabadell’s CEO said the company rejected BBVA’s takeover offer because the bidder underestimated the deal’s negative effect on capital reserves and overestimated cost savings. Shares of both the Spanish lenders closed down over 2 per cent each. REUTERS
