European Stocks Advance; Givaudan Increases, Diageo Falls
Givaudan jumped 6.3 percent after posting full-year net income that beat analyst estimates. Roche Holding AG (ROG) climbed 4.3 percent after forecasting that profit will increase faster amid rising sales. Diageo Plc (DGE), the world’s biggest distiller, lost 4.7 percent after the world’s biggest distiller reported sales growth that missed analysts’ estimates. H&M dropped 3.6 percent.
The Stoxx 600 added 0.3 percent to 323.32 at the close of trading in London. The index today lost as much as 0.7 percent before rising as much as 0.6 percent. The index is heading for its biggest decline since June.
“We’ve had a phenomenal run in European equities, and a lot of it was based on the expectation that earnings will rise,” Mark Andersen, who helps manage $1.7 trillion as head of asset allocation at UBS AG in Zurich, said in an interview. “That puts increased pressure on companies to deliver. Investors might start wondering if the earnings forecasts are too high for the year.”
European shares have fallen 1.5 percent in January as emerging-market currencies slid, fueling concern the global economic recovery is faltering. The gauge rallied 17 percent last year, the most since 2009.
A report today showed that a gauge of pending home sales fell 8.7 percent in December, following a revised 0.3 percent drop the previous month. The median projection in a Bloomberg survey of economists called for a 0.3 percent decline.
Separate data earlier showed the U.S. economy expanded at a 3.2 percent annualized rate in the fourth quarter, in line with the median forecast of 87 economists in a Bloomberg survey. Another report showed more Americans than predicted filed applications for jobless benefits in the week ended Jan. 25.
The Federal Open Market Committee said yesterday it will cut monthly bond purchases by $10 billion to $65 billion, sticking to a plan for a gradual withdrawal from its unprecedented monetary easing. It was the first meeting without a dissent since June 2011. The Fed reiterated that it will probably hold its target interest rate near zero “well past the time” that unemployment falls below 6.5 percent.
A Chinese manufacturing gauge signaled the first contraction since July. A purchasing managers’ Index fell to 49.5 this month from 50.5 in December, HSBC Holdings Plc (HSBA) and Markit Economics said in a statement. The reading compared with the median 49.6 estimate in a Bloomberg News survey of 14 economists. A number below 50 indicates contraction.
Givaudan gained 6.3 percent to 1,342 Swiss francs. The world’s largest maker of flavors and fragrances said 2013 net income was 490 million francs ($543 million), exceeding the 464.5 million-franc analyst projection. The company said it will pay a dividend of 47 francs a share, beating the Bloomberg Dividend Forecast of 42 francs.
Roche advanced 4.3 percent to 249.30 francs. The company said revenue will rise by a low to mid-single-digit percentage this year and profit will increase faster as sales climb for its biggest cancer drugs and a slate of new therapies. Roche also said net income last year gained 18 percent to 11.4 billion francs.
Ericsson AB rose 3.5 percent to 80.10 kronor. The world’s largest maker of wireless networks said gross margin expanded to 37.1 percent of sales in the fourth quarter from 31.1 percent a year earlier. That beat analysts’ estimates.
Royal Dutch Shell Plc (RDSA) gained 1.5 percent to 26.15 euros. Europe’s largest oil producer dropped targets for cash flow, postponed plans to drill in Alaska and pledged to restructure its shale operations in North America in an effort to revive earnings. The Hague-based company said profit excluding one-time items and inventory changes plunged 48 percent from a year earlier to $2.9 billion in the fourth quarter.
Diageo lost 4.7 percent to 1,820 pence, the biggest slump since February 2011. Organic sales rose 1.8 percent in the six months through December, missing the median analyst estimate of 3.5 percent. The maker of Smirnoff vodka and Johnnie Walker whisky said operating profit excluding some items was 2.06 billion pounds ($3.4 billion).
Diageo and HSBC Holdings Plc shares had sudden price swings today. The distiller plunged 11 percent to 1,691 pence around 9:25 a.m., then went back to 1,811.5 pence a few minutes later. HSBC jumped 9.9 percent to 688 pence around 11:20 a.m. before falling to 629 pence shortly after.
H&M dropped 3.6 percent to 276.90 kronor. Europe’s second-biggest clothing retailer reported fourth-quarter net income of 5.61 billion kronor ($869 million), less than the average analyst projection of 6 billion kronor.
Serco Group Plc (SRP) slumped 17 percent to 423.2 pence. The U.K. services provider said it expects a 2013 revenue decline because it won fewer contracts.
Tod’s SpA dropped 8.1 percent to 101.20 euros after the retailer said fourth-quarter revenue was 214.9 million euros ($291.3 million), missing estimates.
TeliaSonera AB lost 2.8 percent to 48.77 kronor. Sweden’s largest phone operator said fourth-quarter net income fell to 2.19 billion kronor, trailing analyst estimates that called for a profit of 3.07 billion kronor.
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