By Dow Jones Business News,
May 07, 2014, 04:55:00 AM EDT
Europe Stocks Suffer from Ukraine Tensions
French lender Société Générale SA and Danish brewer Carlsberg A/S both pointed to tensions in
Russia and Ukraine for forecast-missing earnings Wednesday, in a reminder of how ripples from the Ukraine crisis can
The downbeat earnings news kept European shares under pressure. The Stoxx Europe 600 index was 0.3% lower midmorning
at 335.29, on course for its fifth consecutive daily decline.
Deutsche Bank on Wednesday lowered its year-end target for the benchmark to 355 from 375. European shares should rise
this year, but the "persistent weakness" in corporate profits makes the previous target look overly ambitious, equity
strategists at the bank said.
Société Générale, France's third-largest listed bank by assets, said a EUR525 million ($731.2
million) write-down on its Russian business pushed first-quarter net profit down 13% from a year earlier to EUR315
Carlsberg, meanwhile, trimmed full-year profit guidance and said it now expects adjusted net profit, as well as
operating profit in Danish kroner, to grow by low single-digit percentages, compared with its earlier estimate of mid-
single-digit percentages, citing a weak ruble.
In a bid to offset slowing growth in the West, Carlsberg made a big bet on Eastern Europe in 2008 when it bought the
50% it didn't already own in Baltika Breweries, the market leader in Russia.
European equities remained on the back foot. The U.K'sFTSE 100 lost 0.3%, while France's CAC-40 was and Germany's DAX
were both down 0.1% following steep declines Tuesday.
In the U.S., stock futures were steady following Tuesday's losses on Wall Street. Changes in futures don't necessarily
predict market moves after the opening bell.
Elsewhere, Fiat SpA slipped to the bottom of the Stoxx Europe 600 after Fiat Chrysler overnight announced an ambitious
five-year plan to boost the company's global vehicle sales nearly 60% to 7 million by 2018, even as it disclosed a net
loss for the latest quarter.
Anheuser-Busch InBev reported strong revenue growth during the first quarter, though higher financing costs and
exchange-rate swings pushed down the brewer's profit, and Siemens reported a rise in fiscal second-quarter profit but
said new orders fell.
The German engineering group also delivered the latest sign of a resurgence in merger-and-acquisition activity,
announcing that it will buy most of Rolls-Royce Holdings PLC's civil energy operations.
In the currency markets, the dollar remained largely unloved.
Sterling remained close to $1.70 Wednesday, while the euro continued to hover around $1.39 following strong purchasing
managers indexes from the euro zone Tuesday. The euro last hit that level at the end of February. Strategists struggled
to explain the weakness in the dollar, however.
"Everybody seems to be searching for the missing link," said Jens Nordvig, currency strategist at Nomura. "The moves
cannot be explained by rates. The moves cannot be explained by a reversal of safe-haven flows."
Strategists at Bank of Tokyo Mitsubishi UFJ said that "the ongoing decline in U.S. yields despite building evidence
that a strong economic rebound is under way in the U.S. is serving to undermine confidence in the U.S. dollar."
Later in the day, the market will be scrutinizing quarterly preliminary nonfarm productivity data out of the U.S., as
well as consumer credit figures for March. HSBC economists said that they expect productivity to have fallen 1.1% at an
annual rate in the first quarter, and that unit labor costs rose 2.8% at an annual rate. They said in a note that they
expect to see a $12 billion increase in consumer credit for March.
Monthly interest-rate decisions for both the European Central Bank and the Bank of England are scheduled for Thursday.
Several economists have said that the BOE meeting will be watched particularly closely in the light of unemployment
breaching the 7% threshold by falling to 6.9% in February, potentially putting the discussion of rate rises on the
The ECB, meanwhile, is broadly expected to keep rates unchanged.
In commodities markets, gold rose 0.1% to $1,310.50 an ounce while Brent crude oil added 0.2% to trade at $107.28 a
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