May 15, 2018 / 11:17 AM / 5 days ago

Weak data weighs on European shares, bank stocks rise after results

LONDON (Reuters) - European shares slipped on Tuesday after weak data from China and Germany added to a spate of less encouraging news on the global economy, but the banking sector offered a ray of light after strong results from Austria’s Raiffeisen Bank.

The German share price index, DAX board, is seen at the stock exchange in Frankfurt, Germany, March 21, 2018. REUTERS/Tilman Blasshofer

The pan-European index eased 0.1 percent while Germany’s DAX declined 0.2 percent after Europe’s biggest economy reported first-quarter growth slightly slower than expected.

The earnings season was nearing its close with more than three-quarters of MSCI Europe companies having reported first-quarter results.

“Generally it’s been slightly underwhelming on sales numbers and in line on earnings numbers,” said Rory McPherson, head of investment strategy at Psigma Investment Management.

“European banks have tended to perform quite well and have picked up a lot recently with some good earnings,” he added.

Indeed, on Tuesday bank stocks led the way.

An 81 percent increase in first-quarter net profit sent Raiffeisen shares up, while Commerzbank led the DAX after reporting quarterly pre-tax profit ahead of analysts’ expectations.

Credit Agricole added to the optimism around banking stocks. The French bank’s shares had fallen at the open but recovered to trade up 1.3 percent after quarterly profit fell short of expectations.

Italy’s FTSE MIB, which is heavily weighted to the financial sector, rose 0.4 percent, outperforming European peers.

Italy’s government-forming efforts hid a speedbump late on Monday as 5-Star and League parties won more time to decide on a prime minister.

Dealmaking, which has been rife in European markets this year, continued with Worldline agreeing to buy the payments arm of Swiss stock exchange operator SIX for $2.75 billion.

Shares in the French payments company jumped 4.8 percent, while Atos, which has a majority stake in Worldline, rose 2 percent.

Shares in Switzerland’s Temenos jumped 4.5 percent. The banking software firm was boosted by dealmaking in the sector and by its addition to MSCI’s Switzerland index, traders said.

Overall, price reaction to earnings numbers has been muted, Morgan Stanley analysts said, with earnings misses tending to have a more marked impact.

“You tend to need good guidance as well as beats to warrant good stock performance, which is to be expected nine years into a bull market,” said Psigma’s McPherson.

There was no shortage of fallers after results on Tuesday.

Thyssenkrupp shares dropped 5 percent after the German steel-to-submarines group reported a surprise loss at its Industrial Solutions business.

Meanwhile Iliad shares sank 17 percent to the bottom of the STOXX after a management reshuffle and weak first-quarter results.

French satellite firm Eutelsat also tumbled 8.7 percent after warning it could fall short of its full-year revenue target, and Danish jewelry maker Pandora fell 9.2 percent on lower than expected profit due to a slowdown in China.

Reporting by Helen Reid; Editing by Julien Ponthus/Keith Weir

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