German insurance group Munich Re sent a chill through its sector when it issued a shock profit warning yesterday due to ongoing volatility in markets. Its shares dived 7.3 per cent to €107.88.
“This is a double whammy for Munich Re. They have already been punished by declines in the stock market and now they are being punished again by accounting,” said Mark Satori, head of European equities at Fox-Pitt Kelton. The insurance company will have to revalue its assets in the light of recent stock market declines.
Smaller rival Hannover Re followed in its peer’s footsteps giving a veiled profit warning which knocked its shares 7.2 per cent to €29.97.
Germany’s Allianz slipped 4.6 per cent to €109.13, while French insurance group Axa lost 4.8 per cent to €18.90. The life insurance sector also traded lower as fears over the industry spread, with Dutch group Aegon down 6 per cent to €7.60.
After a breathtaking ride, European shares ended the week a little higher, as gains from the banking sector and strong corporate results cancelled out the bad news from insurers. The pan-European FTSE Eurofirst 300 slid 0.1 per cent yesterday to 1,169.59 bringing its gains for the week to 0.5 per cent.
Banks climbed early in the week but lost ground after more credit writedowns hit financials stocks in the US and Australia on Thursday and yesterday, respectively.
Credit Suisse quelled fears that it would post fresh losses. The Swiss bank revealed only a small net markdown on its credit assets, which underpinned the rally in banking stocks early in the week.
Credit Suisse rose 11.4 per cent to SFr50.65, Anglo-Irish Bank rose 14.6 per cent to €6.19, Bank of Ireland added 1.6 per cent to €5.66. Meanwhile, France’s Société Générale climbed 7.8 per cent to €61.2.
In the telecoms sector, Belgium’s Belgacom slumped 8.8 per cent to €24.72, after being forced to lower its 2008 revenue forecasts on the back of falling demand for mobiles and increasing pressure on call prices.
A fall in the oil price prompted investors to take profits in commodities stocks, with German potashmaker K&S tumbling 14.1 per cent to €65.45, and Norwegian fertiliser company Yara International sliding 5.4 per cent to NKr325. French miner Eramet also lost steam, falling 7.3 per cent to €442.62.
But robust second-quarter results from a string of French companies cushioned the market’s falls at the end of the week. French retail chainPPR rose 8.4 per cent to €70.43 after its results outstripped forecasts. Danone gained 10.3 per cent to €48.29 after posting robust results and an increase in full-year margin guidance.
There was more good news on the results front from construction group Saint-Gobain, which rose 4.2 per cent to €39.31 after reassuring investors with solid first-half results.
