Article Highlights

  • STOXX 600 down 0.7 pct
  • Micro Focus sinks 55 pct after revenue warning
  • Klepierre's offer to Hammerson rebuffed
  • Hammerson +26.2%, Klepierre -3.5%
  • Tech worst-performing sector
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European shares fell on Monday as investors remained cautious ahead of an expected Fed rate hike, while earnings and M&A took center stage with software company Micro Focus sinking and a bid for Hammerson boosting commercial real estate stocks.

Micro Focus dropped 55 percent to a three-year low after it cut its annual revenue forecast and its CEO quit. Revenue was hit by lower license income and issues with its purchase of Hewlett Packard Enterprise assets.

The firm’s shedding of more than half its market value caused Europe’s tech sector index to tumble 2.4 percent, its worst fall since early February when global markets sank.

A scuppered cross-border commercial real estate deal also made waves on Monday, with Hammerson soaring 27 percent to the top of the STOXX 600 after saying it had rebuffed a takeover offer from France’s Klepierre.

The offer, which strategists said would have helped Klepierre gain a foothold in the UK market, valued Hammerson’s shares at a 40.7 percent premium to Friday’s closing price.

Before today’s surge Hammerson’s shares were down 19.8 percent year-to-date, making them attractive to potential suitors. The rejection sent Klepierre shares down 3.5 percent.

“Klepierre owns and operates 100 shopping centers in 16 countries across Europe and the quality has been improved over the past 5 years, with the UK the missing part of the jigsaw (the same could be said of Unibail),” said Liberum strategists, referring to Klepierre competitor Unibail Rodamco.

Europe’s main benchmark, the STOXX 600 index, fell 0.7 percent as investors held their breath ahead of Wednesday’s U.S. Federal Reserve meeting which marks the debut for new Fed Chair Jerome Powell, and a likely interest rate hike.

Eyes were also on a news conference on Brexit negotiations, hastily scheduled by the European Commission for 1145 GMT, as speculation swirled over a potential interim deal ahead of the EU Summit later in the week.

Disappointing results weighed on German consumer goods firm Henkel, which fell 5.1 percent after it said the first quarter was off to a slow start due to delivery difficulties in North America.

While Hammerson’s surge higher drove the European real estate sector index up 0.8 percent to the top spot, tech stocks were the worst performers.

Even before Micro Focus’ dramatic drop, European investors’ sentiment had been turning more cautious on the tech sector which has led stellar gains across global markets.

Unicredit analysts on Monday said they had downgraded the tech sector to ‘neutral’ and upgraded utilities to overweight, arguing investors should increase their share of defensive sectors with economic indicators at elevated levels.

German food processing machinery maker GEA Group gained 4 percent after the firm said its CEO Juerg Oleas was to step down in April 2019 after more than a decade in office.

Sweden’s Dometic fell 3.5 percent after the recreational vehicle products firm was downgraded to “underweight” by Morgan Stanley, whose strategists said the U.S. RV market is overheating.