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European stocks down, but recover from session lows after Bernanke comment

European stocks down, but recover from session lows after Bernanke comment

LONDON _ European shares finished in the red but well off earlier lows Wednesday, as declines from poorly received earnings from companies including lender HBOS were limited by good news on interest rates and mortgages from across the Atlantic.
The pan-European Stoxx 600 index lost just 0.2 percent to 329.39, up from earlier, deeper losses as Wall Street turned higher on news that regulators will lift caps on the number of mortgages Freddie Mac and Fannie Mae can buy. Comments from Federal Reserve Chairman Ben Bernanke suggesting the Fed will stay on the path of easing rates also helped.
Earlier in the day, European indexes had posted losses of around 1.5 percent following poorly received earnings from lender HBOS, some downbeat U.S. economic data and as the euro traded above $1.50 for the first time ever.
Banks were among the worst performers, with U.K. lender HBOS shares down 6.8 percent after it posted a slightly weaker-than-expected 4 percent profit rise to 3.97 billion pounds ($7.9 billion) because of weaker margins and higher bad-debt provisions.
"Financials have had a strong rally, and some are selling into it," said Herman Bots, head of equity research at Theodoor Gilissen Bankiers in Amsterdam, speaking about equity market action on Wednesday.
Also, the euro hit a fresh high against the dollar and in recent action was changing hands at US$1.51 against the US currency.
Howard Archer, chief U.K. and European economist at Global Insight noted that "the strength of the euro against the dollar adds to the increased pressures facing euro-zone growth."
Of national indexes, the U.K. FTSE 100 index closed down 0.2 percent to 6,076.50, the French CAC-40 index lost just 0.1 percent to 4,968.82, while Germany's blue-chip DAX 30 added 0.2 percent to 6,997.85.
Some technology companies made progress in Europe on Wednesday, with Europe's largest chip maker, STMicroelectronics, up 2.2 percent after the French government raised its stake in the firm.
And several companies linked to commodity prices made gains, with Vedanta Resources up 6.1 percent and Rio Tinto up 1.4 percent as gold futures hit a new all-time high on the dollar drop. The contract was recently up $13.60 at $962.50 an ounce.
Sectors under pressure from corporate earnings included construction and media. Shares in French building and broadcasting conglomerate Bouygues pressured the construction sector by falling 6.5 percent. Like HBOS, the firm also reported a 2007 net profit rise _ up 10 percent to euro1.38 billion ($2.1 billion) _ that nevertheless fell just below guidance.
"Lower-than-expected earnings before interest and tax for construction and immobilier (real estate) are the main culprit," said analysts at Dexia, commenting on the firm's profit.
And in Amsterdam, publishing group Wolters Kluwer fell 8.5 percent after it said that its net profit from continuing operations in the quarter ending Dec. 31 rose by 1 percent to 94 million euros ($141.5 million), also missing analysts' expectations. The company also is discontinuing quarterly reporting and noted the impact of a weakening dollar on profits.
Shares in hotels group Accor fell 4.2 percent as it also reported a fiscal year net profit rise that disappointed investors and a weaker performance in the U.S. Net profit rose to euro883 million ($1.3 billion), below the euro950 million analysts had been expecting, according to data compiled by Dow Jones Newswires.
Still, there were a few bright spots among companies reporting on Wednesday. Shares in French utility Gaz de France rose 2.4 percent. Its annual net profit rose 7.6 percent to 2.5 billion euros ($3.8 billion) _ above analyst estimates _ helped by colder weather in the last quarter of 2007 and gains from the purchase and sale of energy.
Shares in German consumer goods and adhesive producer Henkel rose 1.5 percent as it reported a 10.9 percent rise in fourth-quarter net profit to euro244 million (US$367.07 million), also beating market estimates.
Henkel, the maker of Persil washing power and Loctite glue, also said that it is planning to finance its takeover of National Starch without raising capital. It plans to sell all, or part, of its stake in Ecolab to finance the sale.
Shares in steel tube maker Vallourec rose 2.2 percent as Merrill Lynch upgraded the stock to buy from neutral.
The brokerage noted that that higher U.S. natural gas prices and a recent price hike for seamless tubes are pointing to a faster-than-anticipated recovery for the company's North American business. "These improving pricing dynamics should also be reflected in other regions, allowing the company to partially offset cost pressures on a much broader scale," it said.
Shares in Spanish real estate group Immobiliaria Colonial fell over 7 percent to euro1.57 (US$2.36) after the Investment Corp. of Dubai unveiled its takeover offer, worth about euro3 billion (US$4.51 billion). The offer, equal to euro1.85 (US$2.78) euros a share, also allows shareholders to get bonds representing euro2.25 (US$3.38) a share.
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Sarah Turner is a correspondent for Dow Jones Newswires.


Updated : 2021-04-17 11:37 GMT+08:00