MW: Losses for financials weigh on European shares
Adecco shares weaken after earnings; REC shares gain
By Sarah Turner, MarketWatch
LONDON (MarketWatch) -- European shares were lower on Tuesday, with financials such as UBS, Lloyds Banking Group and Aegon giving back a fraction of the steep gains made since March.
The pan-European Dow Jones Stoxx 600 index (ST:SXXP 228.92, -0.64, -0.28%) declined 0.2% to 229.03, pulling back from modest gains and marking the second day of losses in four.
On a regional level, the German DAX index (DX:DAX 5,407, -11.15, -0.21%) declined 0.2% to 5,409.98, the U.K. FTSE 100 index (UK:UKX 4,708, -14.08, -0.30%) dipped 0.2% to 4,715.26 and the French CAC-40 index (FR:PX1 3,510, +5.06, +0.14%) gained 0.2% at 3,511.89.
U.S. stock futures were pointing to a mixed open on Wall Street.
Banks were under pressure in Europe, with UBS (CH:UBSN 16.30, -0.04, -0.24%) (UBS 14.89, -0.22, -1.46%) shares down 1.4%, HSBC Holdings (UK:HSBA 659.30, -9.80, -1.46%) (HBC 54.63, -0.72, -1.30%) down 1.2% and Natixis (FR:KN 2.17, -0.35, -13.77%) shares paring recent sharp gains to trade down 12%.
Insurance firm Aegon (NL:AGN 5.71, -0.27, -4.46%) (AEG 8.05, -0.29, -3.48%) lost 4.5% to trade at 5.74 euros after it was downgraded to neutral from outperform at Credit Suisse.
"Following Aegon's strong recent performance, which has seen the stock up 47% in one month and 30% year to date, we find the upside to our new 12-month target price of 6.7 euros as no longer commensurate with an outperform rating within our coverage universe," the broker said.
Financials have been at the forefront of a broad market rally that started in March and has resulted in a gain of almost 16% for the Stoxx 600 this year, with investors hoping that the worst of the economic downturn is now past.
"The data has been good and earnings have been better than expected. All of that's very positive," said Bernard McAlinden, strategist at NCB Stockbrokers.
Companies updating investors on Tuesday included solar-energy firm Renewable Energy Corp., (NO:REC 49.72, +4.64, +10.27%) with its shares up 10% after the report.
It swung to a second-quarter pretax loss of 721 million Norwegian kroner, from pretax profit of 708 million kroner in the year-earlier period. Revenue rose 9% to 2.3 billion kroner.
The results look better than expected at first sight, said analysts at Kepler.
"REC has delivered better-than-expected cost performance with wafers and, more importantly, has restarted the commercial ramp-up of its `Silicon III' FBR plant in Moses Lake at the beginning of the third quarter, as planned," the analysts said.
Still, it wasn't all good news on the earnings front on Tuesday, with Adecco (CH:ADEN 52.85, +0.30, +0.57%) shares down 3.1% in Zurich.
The Swiss staffing firm swung to a second-quarter net loss of 147 million euros, hurt by impairment charges on goodwill and intangible assets. The year-earlier profit totaled 212 million euros.
Adecco was cautious for the future, saying it doesn't anticipate a material pickup of business activities and has initiated further restructuring measures. See full story.
In the food and drink sector, Diageo (UK:DGE 943.00, +12.50, +1.34%) (DEO 62.20, +0.85, +1.39%) shares rose 1.2% after Deutsche Bank upgraded the drinks maker to buy from hold. The firm's analysts said that in an environment where it's difficult to grow revenue, the group's more mainstream and well diversified portfolio should allow it to outperform the industry.
Pernod-Ricard (FR:RI 52.35, -0.92, -1.73%) shares fell 1.2% after Deutsche Bank cut its stance to sell from hold, saying the shares look expensive after a 22% rally over the past month.
Remy Cointreau (FR:RCO 27.69, -0.61, -2.16%) shares fell 1.9% after it was cut to sell from hold, with Deutsche Bank saying that management actions are taking place at the wrong point in the champagne cycle.
Van der Moolen (NL:MOO 0.41, -0.82, -66.67%) shares dropped 66% after trading resumed in shares of the trading and brokerage firm. On Monday, the firm filed for protection from creditors in the Netherlands after it reported a first-half loss and said it would soon be unable to meet its obligations.
