Carmakers drag down European stocks

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European stocks fell on Monday as profit taking hit carmakers following downgrades for Volkswagen, while falling oil prices hit energy stocks.

The FTSE Eurofirst 300 fell 0.3 per cent to 1,445.8.

German carmaker Volkswagen fell 1.7 per cent to €77.40 after attracting some differing broker views following its forecast-beating results on Friday.

Sal Oppenheim downgraded the stock from “buy” to “neutral”, saying that despite the better results, it did not see “a major trigger driving the shares to new top levels”. WestLB cut its rating from “hold” to “reduce”, also doubting the prospect of further positive surprises.

Lars Zeihn, analyst at WestLB, said: “Consensus estimates are now in line with VW’s 2008 targets, there will probably be no short-term cash return to equity investors and the valuation does not leave upside.”

In spite of target price increases from Goldman Sachs, Deutsche Bank and UBS, VW shares were down x per cent to €x.

Peugeot, which cut its full-year margin outlook following a dip in nine-month sales last week, fell 1.5 per cent to €44.33, while BMW fell 1.2 per cent to €44.64 and Fiat lost 1.3 per cent to €13.68.

Energy stocks struggled in the wake of a 3 per cent slide in crude prices. Norway’s Statoil fell 2.2 per cent to NKr165.25, in spite of reporting forecast-beating third-quarter results thanks to high oil prices in the period.

Norsk Hydro, Statoil’s domestic rival which reported a slightly worse-than-expected rise in third-quarter profit last week, fell 2.8 per cent to NKr148.75. Neste Oil, the Finnish refiner, fell 2.3 per cent to €24.81, while Spanish group Cepsa fell 1.3 per cent to €60.90.

Banks also contributed heavily to the session’s losses. Austria’s Erste Bank outperformed a generally lower bank sector after it reported a 16 per cent rise in third-quarter net profit which fell just shy of expectations. Eastern Europe’s second-biggest lender said trading income fell 22 per cent, while a one off charge also weighed.

In spite of the result, Bear Stearns remained largely upbeat. “The recent good run (30 per cent since June 13) has seen some profit taking,” said analyst Christopher Wheeler.

“However, the fundamental story remains unchanged. The underlying results were positive and 20-per-cent-plus earnings growth through 2009 looks very achievable,” he added

Dresdner Kleinwort was similarly optimistic: “We see nothing to change our view – profit taking today might offer a buying opportunity.”

Erste shares nudged 0.2 per cent lower to €53.80.

Raiffeisen International, one of Erste’s main competitors in eastern Europe, also gave back some of its recent gains (nearly 52 per cent since June 13). The stock fell 0.7 per cent to €89.60.

Dutch bank ABN Amro fell after announcing a 5.6 per cent fall in third-quarter net profit. The bank capped its losses however, as it announced it was to accelerate its restructuring process, including the loss of 500 head office jobs as it seeks to fully integrate Banca Antonveneta, the Italian bank it acquired last year. The stock fell 0.2 per cent to €22.95.

Italian bank Capitalia gained 4 per cent to €6.93 on rumours Spain’s Santander was considering a bid. Santander denied the report, published in Spain’s La Repubblica.

Vivendi, the French media group, made a late dash higher as rumour percolated the market that Alexander Vik, the Norwegian investor who suggested a break up of the group earlier this year, was building a stake from which to launch a takeover bid. The shares gained 0.6 per cent to close at €29.96.

Schneider Electronics, the French maker of electronic switches and components, was the Eurofirst 300’s biggest faller after it agreed to acquire US group American Power Conversion for $6.1bn (€4.87bn), saying it would require a capital increase to fund the move.

“This is unlikely to be well received given the price paid, the stage we are at in the global cycle and the scale of the integration task ahead,” said Patrick Marshall at Credit Suisse. The shares fell 7.2 per cent to €82.

Eiffage, the French construction and concessions group fell 2.9 per cent to €72 after Spanish constructor OHL denied rumours the two companies were in talks to form an alliance.

Hennes & Mauritz, the Swedish fashion group, gained 1 per cent to SKr312 after Morgan Stanley raised its price target from SKr335 to SKr375. The move reflected the company’s new initiatives, “namely international expansion, home shopping, shoes and a new higher-priced former,” the broker said.

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