May 4, 2018 / 7:40 AM / 19 days ago

Bank shares lag European rebound as poor HSBC, BNP results weigh

MILAN (Reuters) - European shares bounced back on Friday as a flurry of good company results rolled in, although the heavyweight banking sector was left behind following poor updates from HSBC (HSBA.L), BNP Paribas (BNPP.PA) and Societe Generale (SOGN.PA).

While the European banking index, recently penalized by softening economic data and cooling expectations about monetary policy tightening, fell 0.7 percent to lead sectoral losers, broad-based gains across sectors lifted the pan-European STOXX 600 index up 0.3 percent in mid-morning trading.

The recent fall in the euro following a rally that started in the second half of last year however has helped Europe outperform Wall Street in the last few weeks, putting the euro zone index .STOXXE on track for six straight weeks of gains.

“The euro has remained under pressure this week on declining expectations about the timeline of an expected tapering of the ECB’s bond buying program. Yesterday the latest EU inflation numbers saw an unexpected decline in inflation on both the headline rate as well as on core prices,” said Michael Hewson, analyst at CMC Markets, in a note.

On Friday solid updates lifted shares in German specialty chemicals firm Lanxess (LXSG.DE), British Airways owner IAG (ICAG.L) and Swiss drug ingredients maker Lonza (LONN.S) to the top of the STOXX, while banking stocks were broadly lower.

Sports car maker Ferrari (RACE.MI) rose to a fresh record, up 5.6 percent, as brokers welcomed its better-than-expected quarterly update, providing more fuel to its stock price rally.

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HSBC declined 3.2 percent after it reported an unexpected 4 percent drop in first-quarter pre-tax profit due to a surge in investments, although its new CEO sought to cheer investors with a share buyback of up to $2 billion.

BNP Paribas and Societe Generale fell sharply, down 2.4 and 5.9 percent respectively, as traders and analysts expressed disappointment with a weak-looking set of first-quarter results from the French banks.

Their declines kept the French blue chip CAC .FCHI down 0.2 percent.

Still among financials, however, insurers Swiss Re (SRENH.S) Generali (GASI.MI) were supported by better than expected quarterly updates, while AXA (AXAF.PA) fell 0.3 percent after first-quarter revenues fell 2.7 percent, pressured by a stronger euro which impacted the value of its sales.

    Forex headwinds were also blamed by BMW (BMWG.DE) for its 3 percent drop in quarterly operating profit. Shares in the German luxury carmaker were down 1.6 percent.

    Air France (AIRF.PA) was the biggest loser on the STOXX, down 7.9 percent. The airline said it expected profits to fall this year due to the effect of strikes at its main French unit.

    Reporting by Danilo Masoni

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