By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- European stock markets stayed choppy
after a European Central Bank rate cut on Thursday, showing muted
reaction to the widely expected move. On a busy day for corporate
earnings, Statoil SA and Sanofi SA dropped after results, while
Infineon Technologies AG soared on an upbeat view.
While some regional indexes added to earlier gains, the Stoxx
Europe 600 index was flat at 296.84, largely unchanged from where
it traded ahead of the ECB outcome. European markets were shuttered
on Wednesday for the May Day holiday, and the index closed off 0.2%
on Tuesday, but closed out April with a 1% gain to 296.72.
Some pressure on the Stoxx 600 was coming from a few
heavyweights that reported results. Among the heavyweights, Statoil
SA shares fell 3.3% after the Norwegian oil and gas company said
first-quarter profit sank 58% on the year, missing forecasts, as
production volumes and prices fell.
Sanofi SA (SNY) dropped 1% after the French drugmaker posted a
45% drop in first-quarter profit and a 5.3% sales fall, as the
company is still suffering from lost patent protection. The
pharmaceutical company said it expects a return to growth later in
the year as that patent effect eases and new products come through
the pipeline.
The euro rose and U.S. stock futures pushed ahead after the ECB
met expectations with a cut to its benchmark rate of 25 basis
points, to 0.5%.
Investors will now look to a press conference with ECB President
Mario Draghi, which began at 8:30 a.m. Eastern.
"The press conference is crucial and it will be fascinating to
see how Mario Draghi addresses the dilemma of low inflation and low
real growth, i.e., low nominal growth...tending to negative nominal
growth," said Stephen Pope, managing partner at Spotlight Ideas in
a note.
"There may well be a shift in the rules on collateral
requirements, but that is simply fiddling with the fraying edges.
What is required is a real hit to the monetary transmission system,
so making the cost of holding capital at the ECB less attractive
than lending," he said.
Data ahead of that meeting showed eurozone manufacturing
activity contracted at a slower-than-forecast pace in April, with
the manufacturing PMI falling slightly to 46.7 from 46.8 in March,
according to Markit. German output contracted for the first time in
2013.
Some downward pressure on markets in Europe also came from a
tumble for Wall Street stocks on Wednesday after the Federal
Reserve said it would continue its $85 billion monthly bond-buying
program, but said it would cut or increase that program depending
on how the economy was performing. Major U.S. indexes all fell
around or close to 1% each.
Analysts at Credit Suisse said in an earlier note that any rate
cut would largely not affect European banks, "in part because we do
not see it as sufficient to have an impact on the current negative
macro background." They said Spanish and Italian banks could be
most negatively hit by a rate cut, as they expect up to 6% of 2014
earnings potentially at risk.
Credit Suisse analysts said they remain cautious on those
peripheral banks, but retain a market perform rating on
higher-quality names that offer superior cash flow potential,
including HSBC PLC (HBC) , BNP Paribas SA , Societe Generale SA and
Julius Baer Gruppe AG
But shares of Banco Santander SA rose over 1% in Madrid, helping
boost the Spain IBEX 35 index .
That was in step with a firmer tone for banks. Shares of BNP and
Societe Generale rose nearly 2% and 1.5%, respectively, in Paris,
providing some support to the French CAC 40 , which rose 0.1% to
3,860.93 amid pressure from heavyweight Sanofi.
The German DAX 30 index rose 0.4% to 7,944.71 as heavyweights
Commerzbank AG and Deutsche Bank AG jumped nearly 4% and 2.5% each,
respectively.
Shares of industrial conglomerate Siemens AG (SI) rose 1%. The
group lowered its profit view due to project-related charges, a
tough economic climate and losses for its solar unit. Net profit
rose 12% in the January-to March period, but it posted a rise in
orders for the fiscal second quarter.
Shares of Infineon surged nearly 8% after the semiconductor
maker said it expects higher revenues and margins for full-year
2013, lifted by market growth and recovering demand for autos.
The FTSE 100 index was flat at 6,447.77. Shares of BG Group PLC
rose 2.7% after the oil and natural gas company reported a 0.8%
fall in net profit for the first quarter, but said it was on track
to meet project milestones for this year.
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