- STOXX 600 down 0.2 pct
- UBS falls after Q1 results miss expectations
- Consumer staples fall on rising U.S. 10Y yields
- Temenos gains after pulling out of Fidessa bid
- Metro sinks as analysts digest Friday profit warning
European shares fell on Monday as results from Switzerland’s biggest bank, UBS, disappointed investors and a rise in U.S. Treasury yields put pressure on bond-proxy sectors.
The pan-European STOXX 600 was down 0.2 percent by 0720 GMT, starting a heavy week of earnings on the back foot.
UBS shares fell 4 percent, among the top STOXX losers despite reporting first-quarter earnings ahead of analysts’ estimates.
The bank struck a cautious note for the coming quarter, its CET1 ratio of capital requirements slightly fell short of expectations and the wealth management business disappointed.
“While the IB unit delivered a strong beat, other units, particularly Global Wealth Management (with a small, approximately 1 percent miss on both assets under management and gross margin) slightly disappointed,” said Baader Helvea analysts.
Consumer staples stocks, which investors have held as proxies to bonds for their stable revenues and income stream, took the most points off the index after U.S. yields hit their highest level since January 2014.
Nestle, AB InBev and Unilever were among the worst-hit, falling 0.5 to 1.6 percent.
Reckitt Benckiser shares tumbled 3.9 percent, dented by a price target cut from JP Morgan.
“Despite weaker economic growth momentum, defensives have struggled to consistently outperform and we remain generally negative given our forecasts that bond yields will rise again,” wrote Goldman Sachs strategist Peter Oppenheimer.
Results spurred the biggest moves on Monday. Overall, MSCI euro zone companies are expected to report earnings growth of 4.9 percent from Q1 2017, according to Thomson Reuters data.
A spate of broker rating cuts bruised German retailer Metro , down 6.9 percent at the bottom of the STOXX after Friday’s profit warning on poor performance in its Russian operations.
Helvea Baader, JP Morgan, Kepler Cheuvreux and Bernstein all cut their price targets on the stock, while HSBC cut it to “reduce” from “buy.”
“While the company did their best to contextualize the timing and the drivers of this announcement, it is the quantum of the profit warning which is concerning, especially given the confidence with which management was previously defending its EBITDA guidance,” wrote Berenberg analysts.
Fresenius Medical declined 4.4 percent after the German dialysis specialist cut its 2018 sales target. It helped push Germany’s DAX down 0.4 percent.
Strong growth in its Chinese market helped boost Philips’ first-quarter results above expectations, sending its shares up 3.5 percent. The Dutch health technology company’s CEO said he saw rising trade tensions between the U.S. and China having a negative impact on its results, however.
And in an an incipient sign of this year’s surge in crude oil prices trickling down to component makers, Rotork, which makes valves for the oil and gas industry, reported strong first-quarter results sending its shares up 10.5 percent.
M&A news also rumbled on. Shares in Swiss banking software business Temenos gained 3.4 percent after it said it would not raise its bid for Fidessa.
The British financial trading systems firm ditched Temenos in favor of a 1.5 billion pound deal with rival bidder Ion.