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European stocks close lower on mixed earnings

European stocks close lower on mixed earnings

LONDON _ European shares closed broadly lower Thursday, as investors weighed mixed earnings from some of the region's top companies, including Bayer AG.
The pan-European Dow Jones Stoxx 600 index fell 1.8 percent to 323.34, with chemical firms leading decliners following earnings-related losses from Bayer and as crude oil futures moved back toward record highs.
Shares in Bayer shed 4.7 percent. The chemical and pharmaceutical company's fourth-quarter net profit fell 78.5 percent to euro67 million (US$101.2 million), well below analyst forecasts, after it took one-off charges.
Miners were also under some pressure, tugged lower by Anglo-Swiss extractor Xstrata. Shares in the company fell 4.1 percent in London after a report that merger talks with Brazil's Vale have broken down.
The Wall Street Journal, citing people familiar with the talks, reported that the disagreements center on the role major Xstrata shareholder Glencore International would play in the combined entity. Other miners in the red included Anglo American, down 0.8 percent, and Kazakhmys, down 0.6 percent.
Of national indexes, the German DAX 30 index fell 1.9 percent to 6,862.52, the French CAC-40 index lost 2.1 percent to 4,865.23 and the U.K. FTSE 100 index closed down 1.8 percent at 5,965.70.
European stocks extended losses after revised estimated U.S. gross domestic product data for the fourth quarter showed the economy moving at the slowest pace for five years. U.S. stocks were lower.
Expectations that the Federal Reserve will continue to cut U.S. interest rates to stave off recession continued to weigh on the dollar, with the euro holding above $1.50 on Thursday.
"The euro's break above $1.50 is a factor that accentuates the risks for the economy and earnings estimates," said Gerhard Schwarz, European equity strategist at UniCredit Markets.
"Since the development of earnings estimates typically lags behind currency development, further earnings revisions should be expected in the coming months," he added. The European earnings season is currently about halfway through.
Bear Stearns equity strategist Roger Hirst said that, although downgrades haven't yet been severe, he believes there will be significant downward revisions to come, especially for resources, chemicals and industrials, all of which have rallied since January.
"We recommend taking the opportunity to reduce exposure here and to build in the more defensive areas of health care and telecoms," said Hirst.
Shares in Royal Bank of Scotland fell 2 percent in a seesaw session. The U.K.'s second-biggest bank reported an 18 percent rise in net income for 2007 and lifted its dividend.
In Paris, shares of scandal-hit Societe Generale rose 1.9 percent following a report that executives at rival bank BNP Paribas sounded out the French government over a possible bid weeks ago. BNP shares closed down 4 percent.
Meanwhile, InBev shares climbed 9.6 percent in Brussels. The brewer said fourth-quarter profit more than doubled, helped by a one-time gain and strong sales in emerging markets, and announced it would triple its dividend.
Net profit at the maker of Beck's and Stella Artois beers improved to euro900 million (US$1.36 billion) from euro371 million a year earlier, helped by an exceptional gain of euro379 million from the sale of 90 percent of its property unit in July.
Pernod Ricard, the Paris producer of wine and liquor, saw its shares climb 2.2 percent after it reported an 18 percent rise in first-half net income to euro588 million (US$889.11 million).
And shares in U.K. insurer Aviva rose 1 percent after its operating profit came in ahead of analyst forecasts. Better known for providing products under the Norwich Union name, Aviva is lifting its dividend 10 percent to 33 pence a share.
Shares in Axa, Europe's second-largest insurance company by market value, slid 3.2 percent after the firm said that 2008 has started in a less-favorable environment.
Full-year net income rose 11 percent, to euro5.67 billion (US$8.57 billion), ahead of analyst estimates.
And shares in Deutsche Telekom, Europe's largest telecommunications company, fell 2.9 percent. The firm reported another quarterly loss, but said its business is stabilizing and reiterated its forecast for flat operating profit and cash flow in 2008.
Rentokil Initial shares dropped 23.3 percent after the company said an unacceptable performance from its City Link parcel delivery business in 2007 means that adjusted pretax profit for 2008 is expected to fall significantly.
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Sarah Turner is a correspondent for Dow Jones Newswires.


Updated : 2020-12-06 10:19 GMT+08:00