August 25, 2017 / 7:33 AM / a year ago

Retail stocks lag depressed European market on competition worries

MILAN (Reuters) - Fresh competition worries hit Ahold and other European retail stocks on Friday with euro strength weighing on the broader market as speeches by central bankers at the Jackson Hole gathering in the U.S. came into focus.

Traders work in front of the German share price index, DAX board, at the stock exchange in Frankfurt, Germany, May 18, 2017. REUTERS/Staff/Remote

Ahold (AD.AS) dropped more than 6 percent after Amazon (AMZN.O) said it will cut prices on a range of goods as it completes its acquisition of Whole Foods Market WFM.O.

Shares in the Dutch supermarket, which has a strong presence on the east coast of the U.S., fell as much as 7.6 percent to their lowest level in 16 months, the biggest decline among European shares.

“Amazon’s price cuts add to the price pressures that already exist in the US,” said AFS Group analyst Jauke de Jong.

“About two-thirds of Ahold’s revenue stems from the U.S., so the news is quite negative as it could need to follow suit by lowering prices as well to defend its market share,” he added.

Gains among financials and energy stocks were not enough to support the pan-European STOXX 600 index, which was down 0.1 percent at its close, having spent the large part of the session in positive territory, while Euro zone blue chips .STOXX50 also ended 0.2 percent lower.

The STOXX fell as the euro EUR= spiked and the dollar dropped back after Federal Reserve Chair Janet Yellen made no reference to U.S. monetary policy in her speech at the Jackson Hole symposium.

Investors stayed cautious before ECB President Mario Draghi was set to deliver his speech after the market closed, even though no major new policy messages are expected.

“Draghi will certainly not breathe a word about the ECB’s bond purchases program, which is due to end in September,” said Ipek Ozkardeskaya, analyst at London Capital Group.

Ozkardeskaya said she saw limited potential for European stocks before the ECB details plans to phase out its big bond purchase program, likely at its September meeting.

“European equity funds redeemed $231 million in the week to August 23.. hinting that some investors may prefer to turn flat before the ECB’s critical announcement,” she said.

The retail index .SXRP fell more than 1 percent, leading sectoral fallers in the region. In the sector, French supermarkets Casino (CASP.PA) and Carrefour (CARR.PA) fell 1.7 percent and 2.2 percent respectively, while Tesco (TSCO.L) and Sainsbury (SBRY.L) were also lower.

Provident Financial (PFG.L) led gainers on the STOXX, up 22.5 percent. The UK subprime lender, which has lost around half of its market value this week after a second profit warning in quick succession, said it had replaced the managing director of its beleaguered home credit business.

Fiat Chrysler (FCHA.MI) rose as much as 2 percent after saying it would evaluate any inquiries about potential tie-ups.

Fiat, however, ended the session 0.7 percent lower, though it has gained nearly 16 percent this week after China’s Great Wall Motor (601633.SS) said it was interested in possible deals with Fiat, sending shares in the Italian American carmaker to a fresh record high.

For a graph on retail stocks click here:

Reporting by Danilo Masoni and Kit Rees; Editing by Matthew Mpoke Bigg

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