Monday 19 March 2018

Worries over global growth drag European shares lower

WORRIES about the global growth outlook dragged European shares lower on Monday and weaker-than-anticipated earnings from leading bank HSBC did little to ease investors concerns.

In early trade, the FTSEurofirst 300 index was down 4.29 points, or 0.4pc, at 1,164.35 points, and the euro zone's blue chip index shed the same to 2,605.93 points.

The early losses echoed a fall in Chinese equities, where worries about Beijing tightening its grip on the property sector compounded weak sentiment.

"Below forecast China PMI data (on Friday) and curbing property expansion is doing little to boost risk appetite. Meanwhile U.S. budget talks and Italy's political uncertainty is adding to the downbeat tone," a London-based trader said.

Washington appears no closer to resolving automatic budget cutting triggers - called the "sequester - which threaten to curb growth the world's biggest economy.

The prospect of a lengthy period of political instability following Italian parliamentary elections is also weighing on markets concerned about a return of the euro zone debt crisis.

With those issues lingering in the background investors took a cautious stance in their stock selection early on Monday.

Cyclical stocks - those assets linked to the economic recovery - such as miners led the fallers, down 2.2pc.

Global miner Anglo American fell 3.8pc as Nomura cut its rating on the firm to "reduce" on valuation grounds and it sees consensus earnings as being too high for 2013.

Banks were lower too with heavy weight HSBC falling 1pc after Europe's largest bank fell short of expectations with a near $21bn pretax profit for last year.

And insurer Aviva shed 2.4pc on concerns it will cut its dividend when full-year results are announced later this week.

"We stay in consolidation mode as global activity continues to roll over. Eurozone M1 (money such as coins and in checking accounts) is weakening, pointing to stalling recovery momentum. (Earnings per share) revisions remain negative and sequesters are coming up," said JP Morgan's Mislav Matejka in a note, adding that his top defensive pick is staples.

Defensive staples - those companies which provide goods and services that consumers need even in an austere economic climate, such as utilities and drugmakers - peppered the risers list.

Drugmaker Shire was up 1.1pc, British American Tobacco added 1.3pc while utilities Severn Trent and Centrica added around 1.5pc each.

Centrica was also boosted by an upgrade to "buy" from "hold" from Societe Generale, which said the firm offers attractive valuation, balance sheet strength, cash generation and disciplined investment.


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