Miners, car makers rise; H&M, Novartis drop after earnings
By Simon Kennedy, MarketWatch
LONDON (MarketWatch) — European shares reversed early losses to trade mostly higher Thursday as mining and automotive stocks rallied, though Swedish fashion chain Hennes & Mauritz AB dropped after its results disappointed investors.
The Stoxx Europe 600 index (ST:STOXX600 283.17, +0.70, +0.25%) was up 0.3% at 283.17 in midmorning trading.
Losses for bank stocks had initially pulled the index lower after Standard & Poor’s cut Japan’s long-term sovereign-debt rating by one notch to AA minus from AA. But the sector swiftly recovered.
“Japanese debt is held primarily by the Japanese, so it’s not clear to me why everyone is so worried,” said Peter Dixon, a strategist at Commerzbank.
If Japan were to default, it would be defaulting on debts owed to the Japanese people, rather than foreign banks, he noted.
“What we’re more focussed on right now is earnings season, which so far is going well,” Dixon added.
Among companies reporting earnings Thursday, shares in U.K. drug maker AstraZeneca PLC (UK:AZN 3,132, +58.50, +1.90%) (AZN 48.59, +0.44, +0.91%) rose 1.7% after it topped earnings expectations and roughly doubled its 2011 share buyback target to $4 billion from $2.1 billion in 2010.
The stock’s rise helped lift the FTSE 100 index (UK:UKX 5,985, +15.58, +0.26%) 0.2% to 5,983.58 as stronger commodity prices helped extend gains for mining stocks.
Randgold Resources Ltd. (UK:RRS 4,962, +223.00, +4.71%) was one of the biggest climbers, adding 4.8% after it was also upgraded to overweight from neutral at HSBC.
While AstraZeneca rose, there was also disappointment with some earnings announcements.
Shares in Hennes & Mauritz (SE:HMB 212.60, -16.10, -7.04%) dropped 6% after the company said fourth-quarter net profit fell 11% to 5.49 billion Swedish kronor ($851 million). The result fell short of the SEK5.9 billion consensus forecast and revenue also missed market expectations.
In Switzerland, shares in drug maker Novartis AG (CH:NOVN 53.35, -1.10, -2.02%) (NVS 57.94, +0.14, +0.24%) fell 1.3% after the drug giant also missed earnings expectations. The group said profit in the latest quarter fell 5.9% to $2.17 billion as restructuring and impairment charges weighed on the bottom line.
Among the other main indexes, the French CAC 40 (FR:PX1 4,065, +15.51, +0.38%) rose 0.2% to 4,055.14 and the German DAX 30 (DX:DAX 7,167, +39.89, +0.56%) climbed 0.5% to 7,160.02 as automotive stocks continued to provide some support for both indexes.
Renault SA (FR:RNO 50.03, +0.59, +1.18%) rose 1.6% in Paris, while in Frankfurt shares in BMW AG (DE:BMW 57.87, +0.81, +1.42%) rose 1.2% and Volkswagen AG (DE:VOW3 120.02, +1.17, +0.98%) rose 1.3% as the sector extended the previous session’s gains.
Commerzbank’s Dixon said the shares continue to be driven by China’s economic strength as the country becomes an increasingly important market for high-end cars.
While there has been volatility in the sector over fears of a boom and bust for China, Dixon said he doesn’t see that scenario on the horizon for the country.
Other European indexes were also mostly higher, with Spain’s IBEX 35 rising 0.3% to 10,697.60 and Italy’s FTSE MIB index up 1% at 22,225, while Portugal’s PSI 20 index was up 0.2% at 7,747.02.
