European shares retreat as earnings disappoint, Italian banks drop

By Danilo Masoni

MILAN (Reuters) - European shares resumed their downward trend on Thursday, hit by disappointing earning updates from UK utility Centrica among others and a fall in Italian banks on continued uncertainty about the country's finances.

At 0954 GMT, the STOXX 600 was down 0.9 percent, with most sectors trading in the red following broad-based gains in the previous session that helped the pan-European index bounce from near two-year lows.

"Hopes have been dashed that yesterday's rally would be the start of a new recovery," said AJ Bell investment director Russ Mould.

Uncertainty over Italian politics, Brexit and worries over slowing economic and earnings growth have discouraged investors from taking risks as central banks take steps to end years of easy monetary policy.

On Thursday, Centrica slid 8.2 percent to lead losers on the STOXX 600 after its trading update. Analysts at Jefferies said even though the company affirmed some of its debt and dividend targets for the year, its earnings per share guidance was 10 percent below consensus.

British industrial group Rotork was another big faller in Europe, down 7.1 percent, following a 4 percent drop in its order intake.

Telecoms firm Altice slumped 10.5 percent after its third quarter core earnings fell nearly 7 percent due to heavy promotions to win customers.

"The key challenge for Altice remains to turn around revenue and EBITDA trends," said Credit Suisse analyst Jakob Bluestone as he lowered his price target on the stock.

Not all earning updates disappointed.

Remy Cointreau rose 2.5 percent after the French spirits group delivered higher first-half profits that were above forecasts, helped by demand for its premium cognac in China and by a tight rein on costs.

Concerns over the global economic outlook have led analysts to cut their 2018 estimate for average European corporate earnings growth to 4.8 percent, from 10 percent seen at the start of the year. Growth in 2019 however is seen rising back to 10 percent.

Italian banks fell 1.9 percent after Deputy Prime Minister Matteo Salvini said the government would not backtrack on its expansionary 2019 budget law following a rejection by the EU Commission.

UBI Banca was the biggest faller, down 2.5 percent, while top lenders UniCredit and Intesa Sanpaolo fell 1.9 and 1.3 percent respectively.

Bearish bets on a number of Italian banks have increased over the past weeks, reflecting their dim profit outlook and worries over the euro zone's third-largest economy.

Miners were the biggest sectoral fallers, down 1.9 percent, as copper prices edged lower on worries over slowing global economic growth, hurt by an escalating trade war between Washington and Beijing. [MET/L]

(Reporting by Danilo Masoni; Editing by Susan Fenton)