European shares steady above 7-week low as tech and telecoms earnings impress (updated)
14/11/2017 09:45
* STOXX 600 steadies
* Infineon, Simcorp lead tech sector after strong earnings
* Altice sinks as Morgan Stanley slashes price target
* Telecoms peers Vodafone, Drillisch gain after results
* Pause in markets "not a big turning point" - BAML
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By Helen Reid
LONDON, Nov 14 (Reuters) - Encouraging earnings from
telecoms and tech companies supported European shares on
Tuesday, helping them steady above a seven-week low hit in the
previous session.
The pan-European STOXX 600 .STOXX erased earlier gains to
trade flat, while telecom and tech sector strength helped German
and French benchmarks gain 0.4 percent, and euro zone blue-chips
.STOXX50E rose 0.1 percent.
"Markets have moved quite a long way and a pause is probably
warranted, but we don't think it's a big turning point," said
Ronan Carr, European equity strategist at Bank of America
Merrill-Lynch (BAML).
"Underlying fundamentals are still pretty constructive in
terms of global growth, and we would be a buyer of any material
dip in markets," he added.
Tech companies were the best-performing after stronger than
expected results. Software maker Simcorp SIM.CO jumped 9.2
percent after earnings beat forecasts.
Internet services provider United Internet UTDI.DE gained
1.8 percent after its acquisition of mobile firm Drillisch
boosted its profits. urn:newsml:reuters.com:*:nFWN1NJ1LX
Peer Scout24 G24n.DE also jumped 4.8 percent.
Chipmaker Infineon IFXGn.DE gained 4.9 percent despite
reporting weaker dollar-dented sales. urn:newsml:reuters.com:*:nL8N1NK18W
"While slightly disappointing, we continue to expect
Infineon's margins to resume their upward trajectory," wrote
Liberum analysts, saying the main headwind to sales and
profitability was the stronger euro.
"Underlying growth trends in the tech sector are quite
strong," said BAML's Carr. "Tech sector revisions momentum has
not definitively bottomed out but it looks like it's finding a
floor, much like the broader market."
Telecoms also delivered strong results.
German firm Drillisch DRIG.DE rose 2.8 percent after it
reported a 9.9 percent rise in nine-month revenues, and
Britain's Vodafone VOD.L gained 4 percent after upping
forecasts for full-year earnings growth. urn:newsml:reuters.com:*:nASM000FYV
urn:newsml:reuters.com:*:nL8N1NK1ND
Altice ATCA.AS bucked the sector trend, sinking 6 percent
after Morgan Stanley cut its price target on the stock by 34
percent, adding to pressure on the shares which are already down
46 percent this year. urn:newsml:reuters.com:*:nP6N1MT01P
Stocks have had violent reactions to results this quarter,
Goldman Sachs strategists said. Earnings-day price moves have
been more than 3.5 times the average daily move - the most
extreme results reactions the bank had data for.
BAML's Carr said: "The penalty for misses is smaller this
quarter, and the boost from beating is at the higher end of the
range, but it's fairly benign. I would not agree that it's been
extreme."
As the earnings season neared its end, MSCI euro zone
companies were tracking 9.9 percent year-on-year earnings growth
in U.S. dollar terms, and 62 percent of companies in the euro
zone index had beaten or met earnings estimates.
Analysts had revised down earnings estimates for the broader
MSCI Europe but downgrades seemed to have stabilised as the
results season developed.
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MSCI Europe analyst revisions bottom out http://reut.rs/2zAndme
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(Reporting by Helen Reid; Editing by Sujata Rao and Mark
Potter)
((Helen.Reid@thomsonreuters.com; +44 20 7542 0402;))
Keywords: EUROPE STOCKS/