European shares slip from highs, knocked by autos and insurers
* FTSEurofirst 300 down 0.2 pct
* BMW (Xetra: 519000 - news) hits autos, insurers knocked by RSA outlook
* Two in three companies missing revenue forecasts -StarMine
By Alistair Smout
PARIS, Nov 5 (Reuters) - European shares slipped off a
five-year high on Tuesday, led lower by car-makers and insurers
as more European blue chips undershot earnings expectations.
Uncertainty in the run-up to an ECB policy meeting also kept
investor enthusiasm - and volumes - in check.
Autos were led lower by BMW, which dropped 2.9
percent after the German carmaker said quarterly profit at its
auto unit fell more than expected, hurt in part by price
discounts in core European markets.
Renault (TLO: RENA-U.TI - news) fell 2.2 percent, extending a recent
slide, after shares in Japanese partner Nissan tumbled
following a profit warning.
The broader Autos and Parts index fell 1.1 percent,
the top sectoral faller in Europe.
Halfway into the European earnings season, 52 percent of
STOXX Europe 600 companies have missed profit
forecasts, and two-thirds have missed revenue forecasts,
according to data from Thomson Reuters StarMine, compared with
the second-quarter result season during which only 42 percent of
companies missed profit forecasts.
"You can manipulate earnings expectations ... but it's
harder to do that with revenues," Andy Ash, head of trading at
Monument Securities, said.
"The rally we've had over the last year has essentially been
through multiple expansion and not through earnings, and sooner
or later the market sees through that," he said, referring to
investors paying more for stocks because they see economic risks
abating, even though earnings have not increased.
The FTSEurofirst 300 index of top
European shares closed down 0.2 percent at 1,291.58 points,
after rising as high as 1,297.29 in early trade, a level not
seen since mid-2008.
Insurers fell 1.1 percent after Britain's largest
general insurer RSA said last week's storms in northern
Europe would hit profits, sending its shares tumbling 6.3
percent.
Legal & General (LSE: LGEN.L - news) fell 2.2 percent despite posting
higher-than-expected sales, as a recent strong run and steep
valuation meant its figures were not as favourable as some had
hoped.
"We still do not see any value within our valuation
framework, though we acknowledge the positive trends in the
business," Roderick Wallace, S&P Capital IQ Equity Research
Analyst, said in a note. The stock had been up nearly 47 percent
for the year.
In Europe, recent tame inflation figures have sparked
speculation about a possible rate cut by the European Central
Bank when it meets on Thursday, though all but one of 23 euro
money market traders polled by Reuters on Monday expect the ECB
to leave borrowing costs unchanged at 0.5 percent.
"The market would be very disappointed if they don't get
some guidance of a rate cut soon," Monument's Ash said.
"I think a rate cut is now factored into the market (as
happening) before the end of December."