Business Irish

Saturday 21 April 2018

European stocks fall on Pearson forecast

Traders work on the floor of the New York Stock Exchange
Traders work on the floor of the New York Stock Exchange

European shares dropped yesterday as investors were shaken by publisher Pearson cutting its profit forecast, which helped fuel concern that the outlook for earnings may be weaker as the reporting season begins.

By mid-afternoon in Dublin, the ISEQ Overall Index was down 0.34pc, or 22.63 points, to 6,547.84.

The leaders on the Dublin market by mid afternoon included speciality baker Aryzta, which rose 2.7pc to €42.32, while dairy firm Glanbia increased 1.8pc to €16.14.

On the other side of the board, the afternoon laggards included packaging giant Smurfit Kappa, which fell 2.8pc to €23.75, while insurance group FBD was down 0.9pc to €7.18.

Elsewhere, the Stoxx Europe 600 Index declined 0.2pc at in London, weighed down by the banks sector, which dropped 0.6pc, and media companies. The FTSE 100 held steady, even as Pearson plunged as much as 31pc.

The Stoxx Basic Resources index declined 0.4pc, paring gains that have made it the best-performing among 19 sectors so far this year, after a 62pc surge in 2016.

Pearson is "just in a difficult kind of business. Publishing in general is suffering at the hands of the internet and I think they're struggling to come up with a solution", said Jasper Lawler, senior market analyst at London Capital Group.

"Our argument has been, and remains, investors have no visibility on what this company looks like in five years," Gary Paulin, head of global equities at Northern Trust Capital Markets, said in a note. British satellite telecoms company Inmarsat was also under pressure, down 4.6pc and among the biggest STOXX fallers after JPMorgan cut its rating on the stock to "neutral" from "overweight".

"The near-term story seems clouded by ongoing legacy pressures, a slower than hoped ramp up in Aviation revenues and rising GX/aviation investment needs," analysts at JPMorgan said in a note. Elsewhere, well-received company updates helped shares in chip-making equipment manufacturer ASML gain 5pc, hitting an all-time high after its earnings beat forecasts. Biotech firm Novozymes also rose 2.8pc after its Q4 report. Fish farmer Marine Harvest was up 4pc after its fourth quarter earnings beat forecasts. Germany's Gerresheimer was the top STOXX riser, up 6.3pc after Deutsche Bank upgraded the drugs packaging firm to "buy".

Meanwhile, the margin on bearish bets on longer-dated US treasuries over bullish positions shrank further as investors fretted over Donald Trump's policies, JP Morgan said.

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