Weaker corporate results weigh on European shares

Weak corporate results weighed on European shares on Friday, while choppy trading in banking shares took away some of the sector's recent gains. Earnings disappointments from the likes of Novo Nordisk soured the mood, with the stock down 15 per cent, the worst performance across the STOXX 600 on the day.

Investors have shown little tolerance for earnings disappointments in recent weeks, with shares of firms missing estimates or warning on profits getting punished severely.

Concerns over the outlook for regional companies have led to a record 38 straight weeks of outflows from European equity funds, the latest data from Bank of America Merrill Lynch and fund tracker EPFR showed.

DUBLIN

The Iseq finished marginally up at 5,932. Bank of Ireland was one of the main movers, closing the session 1.6 per cent up at 19.6 cent on foot of a better-than-expected trading update. While the weakness had widened the deficit in its defined-benefit pension scheme by €250 million, the figure was not as big as initially feared.

Rival Permanent TSB, meanwhile, enjoyed a 4.3 per cent bounce in what was a strong day for financials.

Property investment company Irish Residential Properties Reit (Ires) saw its shares fall by 1.6 per cent to €1.18 while hotel group Dalata was buoyed by a positive broker's note, rising 1.9 per cent to €4.08.

Insulation supplier Kingspan ended the week on a positive note, rising nearly 1 per cent to €21.85. Kingspan shares were hammered earlier this week on foot of supply fears regarding one of its key components.

Ryanair tacked up, ending the day 1.6 per cent higher at €12.72 and tracking sectoral trends elsewhere.

LONDON

Britain's top share index edged higher, led by a rise in airlines following an earnings update from Aer Lingus owner IAG, though banks were also in focus after a busy week of earnings that saw the sector hold near its highest level of 2016.

The FTSE 100 closed 0.1 per cent higher at 6,996.26 points, though it was down 0.3 per cent for the week. IAG was the biggest gainer on the blue-chip index, rising nearly 6 per cent to a four-month high after hiking its dividend as it posted in-line results. "International Consolidated Airlines Group has been buffeted by foreign exchange headwinds and air traffic control strikes but improved its unit revenue performance in the third quarter," Russ Mould, investment director at AJ Bell, said in a note.

Sector peer EasyJet also rose, up 3.4 per cent, while cruise operator Carnival climbed 3.3 per cent. The banking sector, however, was once again in focus after Royal Bank of Scotland reported earnings. The lender fell after a strong start to the session and ended down 1.2 per cent. While operating profit beat consensus expectations, there were significant costs incurred for misconduct and restructuring which saw it post a loss twice as big as analysts had expected. Well-received results from Barclays and Lloyds had buoyed the FTSE 350 banking sector to its highest level for 2016 in the previous session. However, the sector retreated 0.1 per cent after RBS's update.

EUROPE

European stocks fell for a fifth day as companies reported disappointing results while a gauge of the dollar strength swung between gains and losses after a report on US economic growth.

The Stoxx Europe 600 Index headed for its longest losing streak in six weeks after Anheuser-Busch InBev posted a surprise drop in profit and Novo Nordisk , the world's biggest maker of insulin, cut its long-term growth target.

AB InBev lost 4.3 per cent after cutting its revenue projection. Novo Nordisk sank 16 per cent after slashing its long-term target for earnings growth by half. Software company Gemalto tumbled 10 per cent as its revenue missed estimates.

NEW YORK

US stocks rose amid speculation a stronger economy can boost corporate earnings, while the dollar held near a seven-month high on bets interest rates will rise this year.

Equities shook off an early lack of direction amid duelling reports from Amazon and Alphabet. The Google parent rallied 2.5 per cent toward a record, while Amazon fell the most in four months on a disappointing outlook.

Chevron surged on its first profit in a year, and Exxon Mobil slipped after extending its streak of profit declines.

Healthcare shares slumped as AbbVie and Amgen dropped more than 6.9 per cent, and drug distributor McKesson plunged 23 per cent, the most since 1999.

Stocks have struggled to gain momentum since a record reached in August. The S&P 500 has been stuck in a range of about 65 points since then as the looming presidential election and expectations for higher interest rates upstage a recovery in corporate profits. As one of the busiest weeks of the earnings season draws to a close, 78 per cent of the gauge’s firms that reported this season beat profit projections and 59 per cent topped sales estimates. – (Additional reporting, Reuters)