European equity markets endured a grim session Thursday after disappointing results from Nokia fuelled pessimism about the outlook for corporate earnings.
The Finnish mobile phone maker fell 13.6 per cent to €18.12 after it reported slowing market share and a disappointing outlook
Ericsson, the Swedish mobile technology group, which makes handsets in partnership with Japan’s Sony, fell 3.3 per cent to SKr11.70 in response.
Franco-US group Alcatel-Lucent bucked the sector, up 2.1 per cent to €3.8, after the supplier of telecommunications equipment won an order from the Italian province of Bergamo.
The pan-European FTSE Eurofirst 300 fell 0.6 per cent to 1,295.32, taking a dive in the early afternoon when US futures pointed to a weak opening on Wall Street.
UBS provided further ammunition for eurozone bears with a forecast that European corporate earnings would fall 7 per cent in 2008 – and that next year would be even weaker.
“Corporate profitability is being attacked from all sides,” UBS strategist Nick Denton said. “The logical conclusion to the current mix of slowing growth and higher inflation is simply that corporate margins get squeezed.”
UBS strategists expect European earnings to fall 30 per cent from peak to trough. Mr Denton said the FTSE Eurofirst 300 was likely to bottom out at about 1,200 points in the middle of next year, but added that there was potential for the index to shoot lower.
Swiss drugmaker Roche fell 3.5 per cent to SFr164.6 after missing forecasts with a 2 per cent increase in first-quarter sales. Revenues from blockbuster influenza treatment Tamiflu fell 64 per cent after the loss of sales to governments, which have stockpiled the drug in the case of a bird flu pandemic.
Iberdrola shares were a little lower, in spite of reporting a 162 per cent year-on-year gain in first-quarter net profit. Much of this gain was expected after the power generator’s acquisition of Scottish Power and its disposal of non-core assets.
There has been much speculation of a takeover of the Spanish company in recent weeks, and some analysts said the lacklustre share performance reflected dwindling expectations of a take-out. Iberdrola shares were off 0.4 per cent at €9.58.
In comments published by a Swedish newspaper, Scania top executive said the truckmaker’s customers had become more cautious about placing orders because of the credit crunch. Scania shares fell 3.4 per cent to SKr122.75. Domestic rival Volvo also suffered, down 1.7 per cent to SKr89.0.
Frankfurt’s Xetra Dax lost 0.3 per cent to 6,681.81, while in Paris the CAC 40 gained 0.2 per cent to 4,862.14.
The biggest gainer on the French index was Société Générale, up 4.3 per cent to €70.99. The bank rose after a Goldman Sachs upgrade and market speculation that rival Credit Agricole could launch a bid. Agricole shares gained 1.5 per cent to €20.69.
Goldman upgraded its rating on SocGen from “neutral” to “buy” and added it to its conviction buy list.
“We do not believe that Société Générale’s capital markets-exposed businesses have necessarily held up better than those of its peers during the first quarter of 2008. However, low expectations have led to an underperforming share price,” Goldman analysts wrote.
Sodexo, the French contract catering group, climbed 9.4 per cent to €40.60 after reporting a forecast-beating 10.4 per cent rise in first-half net profit. The company reiterated its full-year targets and announced plans to buy back up to 7.8 per cent of its total equity.