July 16, 2012 / 11:09 AM / 5 years ago

Earnings weigh on jittery euro zone shares

* EuroSTOXX 50 down 0.3 pct, FTSEurofirst up 0.1 pct
    * Earnings season off to a gloomy start, more to come
    * Investors look to Bernanke for stimulus

    By Toni Vorobyova
    LONDON, July 16 (Reuters) - European shares were mixed in
thin, jittery summer trading on Monday, as a gloomy start to the
second quarter earnings season kept investors on edge while
prospects of global stimulus measures helped cap losses.
    UK software maker Sage said conditions in European
markets have become tougher and sales at clothing retailer
Hennes & Mauritz grew more slowly than in June. 
    Even Swedish banking group SEB, whose shares rose
on forecast-beating profits, said Europe's austerity measures
and sovereign debt woes could start to infiltrate its
traditionally robust core Nordic markets.
    "The equity market will ultimately remain burdened by two
factors: first, uncertainty and risk regarding the development
of the euro zone debt crisis and second, ongoing negative
earnings revisions, which we do not see ending anytime soon,"
said Tammo Greetfeld, equity strategist at Unicredit.
    He said these factors could lead the EuroSTOXX 50
 to test its September 2011 lows in the current
quarter at around 1,936 points - some 14 percent below current
levels.
    At 1044 GMT, the benchmark index of euro zone blue chips
traded 0.2 percent lower at 2,253.81 points. 
    The broader FTSEurofirst 300 held up better,
reversing earlier losses to trade 0.1 percent higher at 1,043.88
points thanks to gains in defensive drug stocks.
    By mid-session, volumes on the index were at just 20 percent
of the 90-day daily average, contributing to choppy trading.
    Investors who have not yet departed for summer holidays were
reluctant to place big bets ahead of key events this week,
including testimony by Federal Reserve Chairman Ben Bernanke,
which will be scanned for any signs that the U.S. central bank
is getting closer to unveiling fresh stimulus.
    "The market is not going anywhere really until we've heard
Mr Bernanke's testimony," said Zeg Choudhry, head of equities
trading at Northland Capital Partners.
    A weak number from U.S. June retail sales at 1230 GMT could
help galvanise the Fed into action, strategists said.
    
    
    EQUITY OUTFLOWS
    Underlining investor unease, data from EPFR released on
Friday showed modest outflows from European equity funds for the
sixth time in the past eight weeks - even as the market rose
around 5.3 percent over that two-month period.     
    Nokia fell 2.3 percent, with data from Markit
showing short interest in the phone manufacturer has surged to
an all-time high ahead of its results due on Thursday. 
    News that the Finnish firm has slashed the U.S. price of its
flagship smartphone Lumia 900 in half, in an effort to stanch
losses in market share to rivals such as Apple, further
fuelled concerns.  
    With the stock already at 16-year lows, strategists at Exane
forecast that Nokia could be expelled from the EuroSTOXX 50 in
the September review, estimating that this could prompt index
tracker funds to dump some 120 million shares.
    Investors were also wary about earnings from miners, with
several banks recently downgrading their forecasts to reflect
the slump in metals prices. 
    Derivatives strategists at BNP Paribas highlighted materials
as the sector to avoid over the results season in Europe, based
on investor positioning, earnings momentum, margin strength,
recent share price performance and geographical exposure.

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